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Eversheds comment: Any EU challenge to UK's zero rate VAT regime would be a highly political move

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    Commenting on news that the European Union executive plans a review of value added tax (VAT) across the bloc that might call into question Britain's right to waive the sales duty on food, medicines and children's clothing, Giles Salmond, partner and indirect taxation expert at law firm Eversheds, says:

    "Current EU VAT legislation provides that Member States may maintain historic zero rates, such as the UK’s zero rate on food, children’s clothing, books, newly built homes etc. However, this legislation does require these rates to be in compliance with EU law (such as equality between taxpayers) and for “clearly defined social reasons and for the benefit of the final consumer”.  In theory, this may give the Commission the power to challenge some of the UK’s zero-rates, without the need for new EU legislation.  Ultimately, if the EU Commission decided to take such a course, it is likely that the EU’s Court of Justice would decide the matter. This would be a highly political move as the UK moves towards a referendum on EU membership."


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