No: C&E 2                                29 November 1994


                        BUDGET 1994 : VAT

SECOND-HAND GOODS, WORKS OF ART, ANTIQUES AND COLLECTORS' ITEMS

Following consultation with the trade, the Chancellor has
reached decisions on the form in which the European Community (EC)
Seventh VAT Directive on second-hand goods will be implemented in
the United Kingdom. The extension of the margin scheme to virtually all
second-hand goods combined with the introduction of Global
Accounting also makes this a substantial deregulatory measure which will
benefit many small businesses dealing in second-hand goods.


From 1 January 1995 he proposes that:

-       the margin scheme of accounting for VAT be extended
        to all  second-hand goods, works of art, antiques and
        collectors' items except precious metals and gemstones; and

-       a simplified method of accounting for VAT on margin
        scheme  goods be introduced called Global Accounting. Under
        this system, businesses dealing in low value bulk volume
        margin  scheme goods (e.g.postage stamps) will be able to
        account  for VAT on the difference between the total
        purchases and  sales of eligible goods in each tax period rather
        than on  an item by item basis.

From the date of Royal Assent he proposes that:

-       an effective reduced VAT rate of 2.5 per cent be
        introduced  on imports of certain works of art, antiques and
        collectors'  items which are currently exempted from VAT at
        import;

-       any supplies of goods made through agents, including
        auctioneers, when acting in their own names, will be
        treated  for VAT purposes as supplies made to them and by
        them; and

-       an accounting scheme for auctioneers be introduced
        which  will ensure that they continue to only pay VAT on
        their fees.


NOTES FOR EDITORS

1.     These proposed changes will introduce in the UK the
provisions of the Seventh VAT Directive, which was agreed by EC Finance
Ministers in February 1994.

2.     Currently the margin scheme of accounting for VAT is
available only to dealers in a limited range of items such as cars,
boats and antiques which are typically easily identifiable and high
value.

3.     Interested trade bodies have been consulted about
both the  Global Accounting system and the accounting scheme for
auctioneers.

4.     In UK law, when goods or services are supplied
through an agent, the supply for tax purposes is from the principal to
the customer.  However, when the agent acts in their own name,
Customs can allow the supply to be treated for VAT purposes as if it
were    made by the principal to the agent, and by the agent to the
customer. If the customer is registered for VAT, this enables them to
reclaim   the VAT charged on the basis of the invoice provided by the
agent.    The Seventh Directive makes this mandatory when an agent
acts in   their own name.

5. An accounting scheme is being introduced for auctioneers
which will allow them to treat commission charges as creating a
margin for VAT purposes so that their output tax will remain largely
unchanged, otherwise they would have to account for VAT on the full
value of   the goods sold.

6.     The cost to the Exchequer is estimated at -Pounds 10
million in 1994/95 and -Pounds 60 million in 1995/96.

7.     A Compliance Cost Assessment (reference CCA 1) is
available, copies of which can be obtained from Jill Lewis, BACU3, 10th
floor W,   HM Customs & Excise, New King's Beam House, 22 Upper Ground,
London     SE1 9PJ (Tel No: 0171-865-5570).

8.     Details for traders are available in Budget notice BN
6/94.


ISSUED BY:         HM CUSTOMS AND EXCISE,
                   PRESS AND INFORMATION OFFICE,
                   NEW KING'S BEAM HOUSE,
                   22 UPPER GROUND,
                   LONDON, SE1 9PJ

TELEPHONE:         0171 865 5468/5470/5471
FAX:               0171 865 5625