EU targets Poppy Appeal tax break

Tax plans by the European Commission could leave the Royal British Legion facing a big VAT bill on Remembrance Day poppies, it emerged today.

The proposals are part of a move to end VAT breaks for British charities worth about £100 million a year. Legal experts today said the plans, being studied in Brussels, would affect the "supply of goods and services" even by recognised charities, and poppies would be hit.

The Legion supplied 33 million poppies in the run-up to Remembrance Day tomorrow. Last year the appeal raised £22.1 million. It pays nothing

in tax as poppies are zero-rated for VAT, but it estimates that without zero-rating it will have to pay £ 500,000 a year. Spokesman Jeremy Lillies said: "We would hope ministers fight this all the way."

Charities enjoy zero VAT on items including new building, advertising, medical research equipment, fundraising items and the sale of goods in charity shops.

Government sources believe Brussels buried the idea in proposals which also called for the end to zero-rating for children's clothes in Britain - which Chancellor Gordon Brown has promised to reject, using the UK veto if necessary.

A Treasury spokesman said: "The Government has repeatedly made clear we will not accept tax harmonisation." The issue will come to a head at a meeting of EU finance ministers this month.