We think VAT in the UK is complicated enough.    But VAT is a Europe-wide tax, and the EU seems to delight in issuing obscure regulations that muddy the waters yet further.

I became aware of the latest from Kees Veen, EADL Executive Director, who included a snippet on it in the latest edition of HEADLINES, his online newsletter.    It springs, ultimately, from the longstanding sixth directive which basically stated that VAT should be “harmonized” across the EU.

The latest directive, Council Regulation (EC) No 1777/2005 came out on 17 October 2005, is due to be implemented on 1 July 2006, and is “binding in its entirety on all EU Member States”.

It is hard to track down, even with Google (locked filing cabinets in basements spring to mind).    The Revenue Operational Document (ROD), a paper copy of which came from Kees, seems only to be on the Irish revenue site (but then, perhaps only the Irish, who pride themselves in being good Europeans, take it seriously).

So, what does it say?    Well, insofar as I understand it (which is, in truth, not a lot), it says that (I quote from the ROD paper):

“Instruction relating directly to a trade or profession, and instruction aimed at acquiring or updating knowledge for vocational purposes, are treated as being within the ambit of vocational training or retraining services provided under the conditions set out in Article 13(A)(1)(i) (paragraph (ii) First Schedule VAT Act 1972).    Thus, such instruction is an exempted activity for VAT purposes.”

Clear?    No, neither am I.    Fortunately, it seems to be a red herring as far as the UK is concerned.    To quote one helpful advisor “It does not widen the education exemption applied by the UK, but may well do in other EU member states”.    Here, it would only apply anyway to those “eligible bodies” (as set out in VAT Act 1994, Schedule 9, Group 6, Note 1) who provide education in the meaning of the VAT legislation (as opposed to entertainment or whatever it is we are deemed to supply by HMRC).   

But, again according to the piece in Headlines, significant changes are afoot in the Netherlands, at least, where “providers of re-education and further education have to choose between fully taxed or exemption.”

These are not isolated examples.    Take another, wholly different case, this time from Germany, referred recently to the European Court of Justice (ECJ) are reported in the latest (3 March) weekly newsletter from accountants Ernst & Young.    It asks:

“Is tuition for school or university given by a private teacher to be exempt from tax under Article 13A(1)(j) of Directive 77/388/EEC only where the private teacher provides his tuition services directly to the pupils/students as recipients of those services - and therefore is paid by them - or is it sufficient for the private teacher to provide his tuition services to a school or university as recipient of those services?”

Isn’t it wonderful how lawyers and accountants never fail to find things for each other to do?    What would we do without them?

Sources:
1777/2005
Revenue Operational Instruction
Schedule 9 Group 6
Ernst & Young Newsletter