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Customs news

22 January 2003
Issue: 3891 / Categories:


Customs news


Aggregates levy


Customs news


Aggregates levy

The formal industry consultation on waste aggregate has been recently launched by Customs. The purpose of the consultation is to request information from United Kingdom quarry operators about the extent and nature of the problem of waste material arising from the extraction of aggregates. Responses will enable the Government to assess whether there is a clear case for relief from the levy for waste materials, the degree to which this would be of value to industry, and the extent to which it could be operated without undue burdens on business and risk of abuse.

The consultation paper is being sent to the main trade associations with a request that they forward it to their members. It is available on the Customs website, or by post from: Lee Johnson, HM Customs and Excise, Environmental Taxation Development, 1st Floor West, New Kings Beam House, 22 Upper Ground, London SE1 9PJ, tel: 020 7865 4855, e-mail:

Completed questionnaires should be returned to the above addresses by 10 March 2003.

(Source: Customs Business Brief 32/2002 dated 11 December 2002.)



Travel agents

Customs have explained how they intend to treat supplies of discounted holidays made by tour operators, pending the European Court of Justice's decision for Commissioners of Customs and Excise v First Choice Holidays.

By way of background, Customs say that most tour operators sell their holidays through travel agents and pay them a commission for this work. However, many travel agents offer customers a discount on the brochure price of the holiday without the tour operator's knowledge. The travel agents make up the difference by way of a top-up payment.

In Commissioners of Customs and Excise v First Choice Holidays, the tour operator initially treated this payment as part-consideration for the holiday and accounted for VAT under the tour operators' margin scheme on the full amount. When the tour operator learnt of the discounts, it proposed to reduce the gross selling prices in the tour operators' margin scheme calculations accordingly, arguing that the payment is no part of the consideration for the holiday and does not fall to be included in the calculation.

The tribunal and the High Court decided that First Choice could account for VAT on the discounted value of the holiday, but that there was a separate supply, i.e., the top-up payment, between First Choice and the travel agent, which was taxable at the standard rate. Customs did not agree with this interpretation and appealed to the Court of Appeal. Customs' view is that the undiscounted selling price is the consideration for the holiday and there is no separate supply. The Court of Appeal referred the case to the European Court of Justice, whose decision is still awaited.

As a result of the High Court decision, tour operators who included the full value in their calculation have overpaid output tax under the tour operators' margin scheme. But they have also incurred a liability to account for VAT outside the scheme on the separate top-up supply to the travel agent.

Customs will accept claims from tour operators, based on the High Court decision, but claims must take account of the full implications of the judgment, i.e. both the value for VAT of the holiday and the separate taxable supply. In the circumstances, Customs therefore advise tour operators who intend to make claims that:


* any voluntary disclosures which have been received and held pending First Choice will not be processed further until the separate top-up supplies are taken into account;

* any new voluntary disclosures which only take into account the tour operators' margin scheme overdeclaration will be refused. If an appeal results, Customs will seek to have them stood over pending First Choice;

* Customs make assessments for the output tax due on the separate supplies (the £50 supplies);

* for returns subsequent to 13 December 2002, Customs will make protective assessments for any output tax due on the full amount of the holiday under the tour operators' margin scheme and alternative assessments for the separate supplies.


Customs advise that unless the tour operator has actually charged and accounted for output tax on the discounts in line with the High Court decision and sent the relevant documentation to the travel agent:


* voluntary disclosures will be refused; or

* where the input tax has been claimed on returns, protective assessments will be made.

(Source: Customs Business Brief 33/2002 dated 13 December 2002.)



Customs accounts

In the year 2001-02, Customs collected £102.8 billion (net of customs and agricultural duties) for the Exchequer, according to its annual accounts for the year. Of this amount, some £61 billion related to VAT.

At the same time as publishing its accounts, the National Audit Office reported on them. While acknowledging that Customs provided an 'effective check over the assessment, collection and allocation of tax', Sir John Bourn comptroller and auditor general of the National Audit Office, said that there were weaknesses that still needed to be addressed.

With regard to VAT disputes and appeals to the tribunal, Sir John referred to Customs' idea that a mandatory reconsideration stage, before the appeal process started, be introduced. This could reduce the number of appeals withdrawn by Customs as a result of further information received or where errors are discovered. He noted that Customs was aiming to take a 'less adversarial approach', so that fewer traders would find it necessary to appeal.

The report comments on Customs' debt management, noting that Customs acknowledge that there is 'scope for improvement in their systems for recording, tracking, reporting and writing off debt'. Customs' plan is to reduce the amount of debt through better compliance, thereby avoiding the occurrence of debt at all. Overall, the National Audit Office report recommends that Customs should consider the viability and cost of introducing an 'improved, fully-interfaced information technology system to manage and track debt', and also speed up the writing off of debt that is likely to be irrecoverable.

The 93rd Report of the Commissioners of Customs and Excise is available from The Stationery Office or can be downloaded from



Pleasure craft

Temporary importation reliefs are available for yachts imported for sale in certain circumstances. While not new, Customs have decided to clarify the conditions and requirements for claiming these reliefs. As Form C1327 does not establish which of these reliefs are being claimed, use of the form will be withdrawn for yachts imported on or after 1 January 2003.

Entry to temporary importation relief may be considered where a yacht is:


* imported for satisfactory acceptance tests in connection with a sales contract (relief from import charges is limited to six months and cannot be extended). Entry should be made on a SAD (C88) using CPC 53 00 24 or 53 00 44 (for VAT only);

* imported for approval where the consignor wishes to sell and consignee may decide to purchase after inspection (relief limited to two months). Entry should be made on a SAD (C88) to CPC 53 00 28 or 53 00 46 (for VAT only);

* secondhand and imported with a view to sale by auction. Entry should be made on a SAD (C88) to CPC 53 00 30 or 53 00 41 (for VAT only).

(Source: Customs Business Brief 33/2002 dated 13 December 2002.)


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