Clause 73 - Business samples

Finance (No. 3) Bill – in a Public Bill Committee at 9:00 am on 9th June 2011.

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Question proposed, That the clause stand part of the Bill.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

Welcome back to the Chair, Mr Gale. May I say, in passing, congratulations today on your 28th year in the House of Commons? [Hon. Members: “Hear, hear!”] I confess that I would have joined you in entering the House on that day had it not been for the 19,000-vote majority that Alastair Goodlad got in Eddisbury at the time, but c’est la vie—these things happen.

I have a quick question about the clause. It makes changes to the provisions relating to the VAT treatment of samples of goods given away by businesses. I notice that in the tax information and impact note, Her Majesty’s Revenue and Customs invited claims from affected businesses prior to implementation of this provision, which will come into effect on Royal Assent. Will the Minister say how many businesses have expressed an interest to date, since the establishment of this potential measure on 30 September 2010, following the decision on the EMI case?

Photo of David Gauke David Gauke The Exchequer Secretary

It is a pleasure to serve under your chairmanship again, Mr Gale. The clause gives effect to a recent judgment of the Court of Justice of the European Union, which extended the VAT relief available to businesses that give away samples for marketing purposes. The changes made by the clause will remove the restriction that limits the relief to the first sample, so that the second or subsequent sample of identical or not significantly different goods will also be VAT free. The clause will also remove the reference in UK law to the “gift” of a sample, to differentiate between samples and “business gifts”, which are also relieved from VAT, subject to a monthly limit.

The change will be welcomed by businesses that promote their products through the provision of a number of samples to particular individuals or businesses.  It is estimated that the revenue cost of the change is in the region of £10 million for back claims and £5 million per annum going forward.

The right hon. Member for Delyn asked about the business response and representations that we have received. I am not in a position to provide an answer to him, but I will happily write to him and the rest of the Committee in due course to provide details. The measure extends the relief already available to business and will assist those for which giving samples is a key marketing tool.

Question put and agreed to.

Clause 73 accordingly ordered to stand part of the Bill.