Home / Business / UK suggests compromise on reduced VAT scheme
A three-year experiment allowing some EU countries to charge a lower VAT rate on labour-intensive services such as hairdressing - and bicycle repairing - ends on December 31st. Germany wants the experiment to die but France and other countries want an extension through 2015. The UK has suggested a compromise solution even though the UK government doesn't like the scheme....

UK suggests compromise on reduced VAT scheme

Belgium, Greece, Spain, France, Italy, Luxembourg, the Netherlands, and Portugal currently apply reduced VAT rates to window cleaning, hairdressing and the repairing of bicycles, among other services.

But other countries – notably Germany, which has a low overall VAT rate – are concerned about extending the scheme to other sectors, reports the EUpolitix website.

With an agreement needed from all 25 member states, the UK presidency has agreed to a compromise proposal that would allow an extension of the reduced rate scheme to the new member states – Poland and the Czech Republic have already expressed an interest – but would also limit the number of sectors where the rates would apply.

However, Britain has warned that it will not accept any moves to force it to scrap its zero VAT rate on children’s clothing – a move backed by both Ireland and Luxembourg.

The European Commission’ Council of Economic and Finance Ministers (ECOFIN) is meeting this week to discuss this and other issues but no deal is expected until the end of the year.

For the existing UK stance on reduced rates of VAT for bicycle repairing and hairdressing and so on, click the link below…

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