Finance Act 1987

Chapter II Value Added Tax

11 Accounting for and payment of tax

(1) At the end of section 14(1) of the principal Act (which provides for tax to be accounted for and paid in accordance with regulations) there shall be added the words ", and regulations may make different provision for different circumstances".

(2) In Schedule 7 to that Act (administration, collection and enforcement) after sub-paragraph (3) of paragraph 2 there shall be inserted—

“(3A) Regulations under this paragraph may make provision whereby, in such cases and subject to such conditions as may be determined by or under the regulations, tax in respect of a supply may be accounted for and paid by reference to the time when consideration for the supply is received; and any such regulations may make such modifications of the provisions of this Act (including in particular, but without prejudice to the generality of the power, the provisions as to the time when, and the circumstances in which, credit for input tax is to be allowed) as appear to the Commissioners necessary or expedient.”.

12 Credit for input tax

(1) In section 15 of the principal Act, for subsections (1) to (3) there shall be substituted—

“(1) The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for the period (that is input tax on supplies and importations in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below.

(2) The supplies within this subsection are the following supplies made or to be made by the taxable person in the course or furtherance of his business—

(a) taxable supplies;

(b) supplies outside the United Kingdom which would be taxable supplies if made in the United Kingdom;

(c) supplies which section 35 below provides are to be disregarded for the purposes of this Act and which would otherwise be taxable supplies.

(3) The Commissioners shall make regulations for securing a fair and reasonable attribution of input tax to supplies within subsection (2) above, and any such regulations may provide for—

(a) determining a proportion by reference to which input tax for any prescribed accounting period is to be provisionally attributed to those supplies;

(b) adjusting, in accordance with a proportion determined in like manner for any longer period comprising two or more prescribed accounting periods or parts thereof, the provisional attribution for any of those periods; and

(c) the making of payments in respect of input tax, by the Commissioners to a taxable person (or a person who has been a taxable person) or by a taxable person (or a person who has been a taxable person) to the Commissioners, in cases where events prove inaccurate an estimate on the basis of which an attribution was made.”.

(2) In section 6(1) of that Act, for the words "the charge to tax" there shall be substituted the words "this Act".

(3) In section 35(1) and (2) of that Act, for the words "shall be disregarded" there shall be substituted the words "shall, except where the contrary intention appears, be disregarded".

(4) This section shall have effect in relation to supplies and importations made on or after 1st April 1987, and shall be deemed to have come into force on 23rd March 1987.

13 Supplies abroad etc.

(1) The principal Act shall be amended as follows.

(2) In section 2(5), at the end there shall be added the words ", and a person who is registered under paragraph 11A of that Schedule is a taxable person (notwithstanding that he does not make and does not intend to make taxable supplies)".

(3) In section 48(1), for the definition of "taxable person" there shall be substituted—

• “'taxable person' means a person who is a taxable person under section 2(2) or (5) above;”.

(4) In Schedule 1, after paragraph 11 there shall be inserted—

“11A(1) Where a person satisfies the Commissioners that he is within sub-paragraph (2) below, they may, if he so requests and they think fit, register him from such date and subject to such conditions as they think fit.

(2) A person is within this sub-paragraph if—

(a) he has a business establishment in the United Kingdom or his usual place of residence is in the United Kingdom;

(b) he does not make and does not intend to make taxable supplies; and

(c) he makes or intends to make in the course or furtherance of his business supplies within sub-paragraph (3) below.

(3) A supply is within this sub-paragraph if—

(a) it is made outside the United Kingdom but it would be a taxable supply if made in the United Kingdom; or

(b) section 35 of this Act provides that it is to be disregarded for the purposes of this Act, and it would otherwise be a taxable supply.

(4) The Commissioners may at any time, if they think fit, cancel as from that time the registration of a person who is not liable to be registered and whose registration was effected under this paragraph.

(5) A registered person whose registration was effected under this paragraph shall, if he makes or forms the intention of making taxable supplies, notify the Commissioners within thirty days that he has done so or formed the intention of doing so.

(6) Conditions under sub-paragraph (1) above—

(a) may be imposed wholly or partly by reference to, or without reference to, any conditions prescribed for the purposes of this paragraph; and

(b) may (whenever imposed) be subsequently varied by the Commissioners.

(7) Where the Commissioners refuse to act on a request made by a person under sub-paragraph (1) above, or where they cancel a person's registration under sub-paragraph (4) above, they shall give him written notice of their decision and of the grounds on which it was made.

(8) For the purposes of this paragraph—

(a) a person carrying on a business through a branch or agency in the United Kingdom shall be treated as having a business establishment in the United Kingdom; and

(b) 'usual place of residence', in relation to a body corporate, means the place where it is legally constituted.”.

(5) In Schedule 5, item 2 of and Note (1) to Group 15 shall cease to have effect.

14 Registration

(1) Schedule 1 to the principal Act shall be amended as follows.

(2) For paragraph 1 there shall be substituted—

“1(1) Subject to sub-paragraphs (2) to (5) below, a person who makes taxable supplies but is not registered is liable to be registered—

(a) after the end of any quarter, if the value of his taxable supplies—

(i) in that quarter has exceeded £7,250; or

(ii) in the four quarters then ending has exceeded £21,300; or

(b) at any time, if there are reasonable grounds for believing that the value of his taxable supplies in the period of one year then beginning will exceed £21,300.

(2) A person is not liable to be registered by virtue of sub-paragraph (1)(a)(i) above after the end of any quarter if the Commissioners are satisfied that the value of his taxable supplies in that quarter and the next three quarters will not exceed £21,300.

(3) A person is not liable to be registered by virtue of sub-paragraph (1)(a)(ii) above after the end of any quarter if the Commissioners are satisfied that the value of his taxable supplies in the next four quarters will not exceed £20,300.

(4) In determining the value of a person's supplies for the purposes of sub-paragraph (1)(a) above, supplies made at a time when he was previously registered shall be disregarded if—

(a) his registration was cancelled otherwise than under paragraph 10 below, and

(b) the Commissioners are satisfied that before his registration was cancelled he had given them all the information they needed in order to determine whether to cancel the registration.

(5) In determining the value of a person's supplies for the purposes of sub-paragraph (1) above, supplies of goods that are capital assets of the business in the course or furtherance of which they are supplied shall be disregarded.”.

(3) For paragraph 2 there shall be substituted—

“2(1) Subject to sub-paragraph (2) below, a registered person who makes taxable supplies shall cease to be liable to be registered at any time if the Commissioners are satisfied that the value of his taxable supplies in the period of one year then beginning will not exceed £20,300.

(2) A person shall not cease to be liable to be registered by virtue of sub-paragraph (1) above if the Commissioners are satisfied that the reason the value of his taxable supplies will not exceed £20,300 is that in the period in question he will cease making taxable supplies, or will suspend making them for a period of thirty days or more.

(3) In determining the value of a person's supplies for the purposes of sub-paragraph (1) above, supplies of goods that are capital assets of the business in the course or furtherance of which they are supplied shall be disregarded.”.

(4) For paragraph 3 there shall be substituted—

“3(1) A person who by virtue of paragraph 1(1)(a) above is liable to be registered after the end of any quarter shall notify the Commissioners of that liability within thirty days of the end of that quarter.

(2) The Commissioners shall register any such person (whether or not he so notifies them) with effect from the end of the month in which the thirtieth day falls or from such earlier date as may be agreed between them and him.”.

(5) For paragraph 4 there shall be substituted—

“4(1) A person who by virtue of paragraph 1(1)(b) above is liable to be registered by reason of the value of his taxable' supplies in any period shall notify the Commissioners of that liability within thirty days of the beginning of that period.

(2) Subject to sub-paragraph (3) below, the Commissioners shall register any such person (whether or not he so notifies them) with effect from the end of the thirty days or from such earlier date as may be agreed between them and him.

(3) Where there are reasonable grounds for believing that the value of such a person's taxable supplies in the first thirty days of the period will exceed £21,300, the Commissioners may, if they think fit, register him with effect from the beginning of the period.”.

(6) Paragraph 6 shall cease to have effect.

(7) For paragraph 7 there shall be substituted—

“7(1) A registered person who ceases to make taxable supplies shall notify the Commissioners of that fact within thirty days of the day on which he does so.

(2) Subject to sub-paragraph (3) below, the Commissioners shall cancel the registration of a registered person who ceases to make taxable supplies with effect from the day on which he so ceases or from such later date as may be agreed between them and him.

(3) The Commissioners shall not be under a duty to cancel the registration of such a person (although they may cancel it if they think fit) if they are satisfied that he is (on ceasing to make taxable supplies) within paragraph 11 A(2) below.”.

(8) In paragraph 9, for the words "paragraph 2(b)" there shall be substituted the words "paragraph 2".

(9) In paragraph 11, for sub-paragraph (2) there shall be substituted—

“(2) Where there is a material change in the nature of the supplies made by a person exempted from registration under sub-paragraph (1)(a) above he shall notify the Commissioners of the change—

(a) within thirty days of the day on which it occurred; or

(b) if no particular day is identifiable as the day on which it occurred, within thirty days of the end of the quarter in which it occurred.

(2AA) Where there is a material alteration in any quarter in the proportion of taxable supplies of such a person that are zero-rated, he shall notify the Commissioners of the alteration within thirty days of the end of the quarter.”.

(10) For paragraph 13 there shall be substituted—

“13 The value of a supply of goods or services shall be determined for the purposes of this Schedule on the basis that no tax is chargeable on the supply.”.

15 Supplies to groups

(1) In the principal Act, after section 29 there shall be inserted—

“29A Supplies to groups.

(1) Subject to subsections (2) and (3) below, subsection (4) below applies where—

(a) a business, or part of a business, carried on by a taxable person is transferred as a going concern to a body corporate treated as a member of a group under section 29 above;

(b) on the transfer of the business or part, chargeable assets of the business are transferred to the body corporate; and

(c) the transfer of the assets is treated by virtue of section 3(3)(c) above as neither a supply of goods nor a supply of services.

(2) Subsection (4) below shall not apply if the representative member of the group is entitled to credit for the whole of the input tax on supplies to it and importations by it—

(a) during the prescribed accounting period in which the assets are transferred, and

(b) during any longer period to which regulations under section 15(3)(b) above relate and in which the assets are transferred.

(3) Subsection (4) below shall not apply if the Commissioners are satisfied that the assets were acquired by the taxable person transferring them more than three years before the day on which they are transferred.

(4) The chargeable assets shall be treated for the purposes of this Act as being, on the day on which they are transferred, both supplied to the representative member of the group for the purpose of its business and supplied by that member in the course or furtherance of its business.

(5) A supply treated under subsection (4) above as made by a representative member shall not be taken into account as a supply made by him when determining the allowance of input tax in his case under section 15 above.

(6) The value of a supply treated under subsection (4) above as made to or by a representative member shall be taken to be the open market value of the chargeable assets.

(7) For the purposes of this section, the open market value of any chargeable assets shall be taken to be the price that would be paid on a sale (on which no tax is payable) between a buyer and a seller who are not in such a relationship as to affect the price.

(8) The Commissioners may reduce the tax chargeable by virtue of subsection (4) above in a case where they are satisfied that the person by whom the chargeable assets are transferred has not received credit for the full amount of input tax arising on the acquisition by him of the chargeable assets.

(9) For the purposes of this section, assets are chargeable assets if their supply in the United Kingdom by a taxable person in the course or furtherance of his business would be a taxable supply (and not a zero-rated supply).”.

(2) This section shall have effect in relation to transfers of assets made on or after 1st April 1987, and shall be deemed to have come into force on 23rd March 1987.

16 Tour operators

(1) After section 37 of the principal Act there shall be added—

“37A Tour operators.

(1) The Treasury may by order modify the application of this Act in relation to supplies of goods or services by tour operators or in relation to such of those supplies as may be determined by or under the order.

(2) Without prejudice to the generality of subsection (1) above, an order under this section may make provision—

(a) for two or more supplies of goods or services by a tour operator to be treated as a single supply of services;

(b) for the value of that supply to be ascertained, in such manner as may be determined by or under the order, by reference to the difference between sums paid or payable to and sums paid or payable by the tour operator;

(c) for account to be taken, in determining the tax chargeable on that supply, of the different rates of tax that would have been applicable apart from this section;

(d) excluding any body corporate from the application of section 29 above;

(e) as to the time when a supply is to be treated as taking place.

(3) In this section 'tour operator' includes a travel agent acting as principal and any other person providing for the benefit of travellers services of any kind commonly provided by tour operators or travel agents.

(4) Section 45(3) below shall not apply to an order under this section, notwithstanding that it makes provision for excluding any tax from credit under section 14 above.”.

(2) In section 45 of that Act, at the beginning of subsection (4) there shall be inserted the words "Subject to section 37A(4) above".

17 Valuation of supplies at less than market value

(1) In Schedule 4 to the principal Act, at the beginning of paragraph 1(1 )(c) there shall be inserted the words "if the supply is a taxable supply,".

(2) This section shall have effect in relation to supplies made on or after 1st April 1987, and shall be deemed to have come into force on 23rd March 1987.

18 Issue of securities

(1) In Schedule 6 to the principal Act (exemptions), in Group 5 (finance)—

(a) at the end of item 5 there shall be added the words "or the underwriting of an issue within item 1"; and

(b) after item 6 there shall be inserted the following item—

“6A The making of arrangements for, or the underwriting of, an issue within item 6.”.

(2) This section shall have effect in relation to supplies made on or after 1st April 1987, and shall be deemed to have come into force on 23rd March 1987.

19 Interpretation and miscellaneous further amendments

(1) In this Chapter "the principal Act" means the Value Added Tax Act 1983.

(2) The principal Act shall have effect subject to the further amendments in Schedule 2 to this Act; and the amendment in that Schedule of section 7 of the principal Act shall have effect with respect to services supplied on or after 1st April 1987.