Cycle repairers in the UK will have to wait another 12 months before finding out if the European Commission intends to expand a reduced rate of VAT scheme that is currently enjoyed by only a handful of Member States.

Dutch IBDs benefit from 5% VAT on servicing, UK IBDs don’t

The UK government has dragged its heels on adding bike repairs to Annex H of the sixth Directive on the common system of VAT but may be forced to accept the changes by the European Commission.

In 1999 the Commission introduced an experimental directive allowing EU countries to choose whether or not to apply a reduced rate of VAT in respect of certain "labour intensive services" in a bid to create jobs. These services included cycle repairs, house repairers, hairdressers and window cleaners. However, only three Member States – Belgium, Luxembourg and the Netherlands – took up the option in respect of cycle repairs, applying a reduced rate of VAT of six percent.

The experiment was originally set to run from the beginning of 2000 until the end of 2002, at which time the Commission said it would consider expanding the scheme as part of more general proposals on reduced rates of VAT across the EU.

Internal market Commissioner Frits Bolkestein said that Brussels wanted to to allow the present arrangements to continue until December 2003, when the Commission will have made “an overall assessment and proposals regarding all reduced VAT rates, including the treatment of labour-intensive services.”

The European trade organisation ETRA, of which the ACT is a member, has been lobbying to get the reduced VAT rate adopted Eurowide.

Accoring to ETRA, IBDs in the Netherlands have reported increased levels of business thanks to the VAT reduction, with people taking their bicycles to IBDs more regularly for checkups and repairs.

By Jonathan Thomson.

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