Finance Act 1989

Section 18.

SCHEDULE 3 U.K. Value Added Tax: Buildings and Land

Zero-rating U.K.

1 For Group 8 (construction of buildings etc.) of Schedule 5 (zero-rating)to the M1 Value Added Tax Act 1983 there shall besubstituted—

“Group 8—Construction of Dwellings, Etc.

Item No.

1 The grant by a person constructing a building—

(a) designed as a dwelling or number of dwellings; or

(b) intended for use solely for a relevant residential purpose or a relevantcharitable purpose,

of a major interest in, or in any part of, the building or its site.

2 The supply in the course of the construction of—

(a) a building designed as a dwelling or number of dwellings or intended foruse solely for a relevant residential purpose or a relevant charitablepurpose; or

(b) any civil engineering work necessary for the development of a permanentpark for residential caravans,

of any services other than the services of an architect, surveyor or anyperson acting as consultant or in a supervisory capacity.

3 The supply to a person of—

(a) materials; or

(b) builders’ hardware, sanitary ware or other articles of a kind ordinarilyinstalled by builders as fixtures,

by a supplier who also makes to the same person supplies within item 2 ofthis Group or Group 8A below of services which include the use of thematerials or the installation of the articles.

Notes:

(1) “Grant” includes assignment.

(2) “Dwelling” includes a garage constructed at the same time asa dwelling for occupation together with it.

(3) Use for a relevant residential purpose means use as—

(a) a home or other institution providing residential accommodation forchildren;

(b) a home or other institution providing residential accommodation withpersonal care for persons in need of personal care by reason of old age,disablement, past or present dependence on alcohol or drugs or past or presentmental disorder;

(c) a hospice;

(d) residential accommodation for students or school pupils;

(e) residential accommodation for members of any of the armed forces;

(f) a monastery, nunnery or similar establishment; or

(g) an institution which is the sole or main residence of at least 90 percent. of its residents,

except use as a hospital, a prison or similar institution or an hotel,inn or similar establishment.

(4) Use for a relevant charitable purpose means use by a charity in either orboth of the following ways, namely—

(a) otherwise than in the course or furtherance of a business;

(b) as a village hall or similarly in providing social or recreationalfacilities for a local community.

(5) Where part of a building is designed as a dwelling or number of dwellingsor intended for use solely for a relevant residential purpose or a relevantcharitable purpose (and part is not)—

(a) a grant or other supply relating only to the part so designed or intendedfor such use (or its site) shall be treated as relating to a building sodesigned or intended for such use;

(b) a grant or other supply relating only to the part neither so designed norintended for such use (or its site) shall not be so treated; and

(c) in the case of any other grant or other supply relating to, or to any partof, the building (or its site), an apportionment shall be made to determinethe extent to which it is to be so treated.

(6) Where all or part of a building is intended for use solely for a relevantresidential purpose or a relevant charitable purpose—

(a) a supply relating to the building (or any part of it) shall not be takenfor the purposes of item 2 or 3 as relating to a building intended for suchuse unless it is made to a person who intends to use the building (or part)for such a purpose; and

(b) a grant or other supply relating to the building (or any part of it) shallnot be taken as relating to a building intended for such use unless before itis made the person to whom it is made has given to the person making it acertificate in such form as may be specified in a notice published by theCommissioners stating that the grant or other supply (or a specified part ofit) so relates.

(7) The grant of an interest in, or in part of, a building designed as adwelling or number of dwellings is not within item 1 if—

(a) the interest granted is such that the grantee will not be entitled toreside in the building, or part, throughout the year; or

(b) residence there throughout the year will be prevented by the terms of acovenant, statutory planning consent or similar permission.

(8) Where the major interest referred to in item 1 is a tenancy orlease—

(a) if a premium is payable, the grant falls within that item only to theextent that it is made for consideration in the form of the premium; and

(b) if a premium is not payable, the grant falls within that item only to theextent that it is made for consideration in the form of the first payment ofrent due under the tenancy or lease.

(9) The reference in item 2 to the construction of a building or work does notinclude a reference to—

(a) the conversion, reconstruction, alteration or enlargement of an existingbuilding or work; or

(b) any extension or annexation to an existing building which provides forinternal access to the existing building or of which the separate use, lettingor disposal is prevented by the terms of any covenant, statutory planningconsent or similar permission;

and the reference in item 1 to a person constructing a building shall beconstrued accordingly.

(10) A caravan is not a residential caravan if residence in it throughout theyear is prevented by the terms of a covenant, statutory planning consent orsimilar permission.

(11) Item 2 does not include the supply of services described in paragraph 1(1)or 5(3) of Schedule 2 to this Act.

(12) The goods referred to in item 3 do not include—

(a) finished or prefabricated furniture, other than furniture designed to befitted in kitchens;

(b) materials for the construction of fitted furniture, other than kitchenfurniture;

(c) domestic electrical or gas appliances, other than those designed toprovide space heating or water heating or both; or

(d) carpets or carpeting material.

(13) Section 16(3) of this Act does not apply to goods forming part of adescription of supply in this Group.”

Marginal Citations

M1 1983 c. 55.

2 (1) Group 8A (protected buildings) of that Schedule shall be amended asfollows.

(2) In item 1, for the word “granting” there shall be substituted theword “grant”.

(3) In Note (1), for the words “a building which” there shall besubstituted the words “a building which is designed to remain as or becomea dwelling or number of dwellings or is intended for use solely for a relevantresidential purpose or a relevant charitable purpose after the reconstructionor alteration and which, in either case,”.

(4) After that Note there shall be inserted—

“(1A) Notes (1) to (8) to Group 8 above apply in relation to this Group as theyapply in relation to that Group.”

(5) Note (5) shall be omitted.

(6) After Note (6) there shall be inserted—

“(6A) For the purposes of item 2 the construction of a building separate from,but in the curtilage of, a protected building does not constitute analteration of the protected building.”

(7) The following Note shall be substituted for Note (7)—

“(7) Item 2 does not include the supply of services described in paragraph 1(1)or 5(3) of Schedule 2 to this Act.”

3 In Group 11 (caravans and houseboats) of that Schedule, for paragraph (b)of the Note there shall be substituted—

“(b) the supply of accommodation in a caravan or houseboat.”

Exemptions U.K.

4 (1) For Group 1 (land) of Schedule 6 (exemptions) to the M2 Value Added Tax Act 1983 there shall be substituted—

“Group 1 – Land

Item No.

1 The grant of any interest in or right over land or of any licence tooccupy land, other than—

(a) the grant of the fee simple in—

(i) a building which has not been completed and which is neither designed asa dwelling or number of dwellings nor intended for use solely for a relevantresidential purpose or a relevant charitable purpose;

(ii) a new building which is neither designed as a dwelling or number ofdwellings nor intended for use solely for a relevant residential purpose ora relevant charitable purpose after the grant;

(iii) a civil engineering work which has not been completed;

(iv) a new civil engineering work;

(b) the grant of any interest, right or licence consisting of a right to takegame or fish;

(c) the provision in an hotel, inn, boarding house or similar establishmentof sleeping accommodation or of accommodation in rooms which are provided inconjunction with sleeping accommodation or for the purpose of a supply ofcatering;

(d) the provision of holiday accommodation in a house, flat, caravan,houseboat or tent;

(e) the provision of seasonal pitches for caravans, and the grant offacilities at caravan parks to persons for whom such pitches are provided;

(f) the provision of pitches for tents or of camping facilities;

(g) the grant of facilities for parking a vehicle;

(h) the grant of any right to fell and remove standing timber;

(i) the grant of facilities for housing, or storage of, an aircraft or formooring, or storage of, a ship, boat or other vessel;

(j) the grant of any right to occupy a box, seat or other accommodation at asports ground, theatre, concert hall or other place of entertainment; and

(k) the grant of facilities for playing any sport or participating in anyphysical recreation.

Notes:

(1) “Grant” includes an assignment, other than an assignment ofan interest made to the person to whom a surrender of the interest could bemade.

(2) A building shall be taken to be completed when an architect issues acertificate of practical completion in relation to it or it is first fullyoccupied, whichever happens first; and a civil engineering work shall be takento be completed when an engineer issues a certificate of completion inrelation to it or it is first fully used, whichever happens first.

(3) Notes (2) to (6) to Group 8 of Schedule 5 to this Act apply in relationto this Group as they apply in relation to that Group.

(4) A building or civil engineering work is new if it was completed less thanthree years before the grant.

(5) Subject to Note (6), the grant of the fee simple in a building or workcompleted before 1st April 1989 is not excluded from this Group by paragraph(a)(ii) or (iv).

(6) Note (5) does not apply where the grant is the first grant of the feesimple made on or after 1st April 1989 and the building was not fullyoccupied, or the work not fully used, before that date.

(7) Where a grant of an interest in, right over or licence to occupy landincludes a valuable right to take game or fish, an apportionment shall be madeto determine the supply falling outside this Group by virtue of paragraph (b).

(8) “Similar establishment” includes premises in which there isprovided furnished sleeping accommodation, whether with or without theprovision of board or facilities for the preparation of food, which are usedby or held out as being suitable for use by visitors or travellers.

(9) “Houseboat” includes a houseboat within the meaning of Group11 of Schedule 5 to this Act.

(10) “Holiday accommodation” includes any accommodation advertisedor held out as such.

(11) A seasonal pitch is a pitch—

(a) which is provided for a period of less than a year; or

(b) which is provided for a year or a period longer than a year but which theperson to whom it is provided is prevented by the terms of any covenant,statutory planning consent or similar permission from occupying by living ina caravan at all times throughout the period for which the pitch is provided.

(12) “Mooring” includes anchoring or berthing.

(13) Paragraph (k) shall not apply where the grant of the facilities isfor—

(a) a continuous period of use exceeding twenty-four hours; or

(b) a series of ten or more periods, whether or not exceeding twenty-fourhours in total, where the following conditions are satisfied—

(i) each period is in respect of the same activity carried on at the sameplace;

(ii) the interval between each period is not less than one day and not morethan fourteen days;

(iii) consideration is payable by reference to the whole series and is evidencedby written agreement;

(iv) the grantee has exclusive use of the facilities; and

(v) the grantee is a school, a club, an association or an organisationrepresenting affiliated clubs or constituent associations.”

(2) In consequence of the amendment made by sub-paragraph (1) above, inparagraph 9(1) of Schedule 4 to the M3 Value Added Tax Act1983 for “(a)” there shall be substituted “(c)”.

Marginal Citations

M2 1983 c.55.

M3 1983 c. 55.

Other provisions U.K.

5 The following section shall be substituted for section 21 (refund of taxto person constructing dwelling) of the Value Added Tax Act 1983—

“21 Refund of tax to persons constructing certain buildings.

“21 (1) Subject to subsection (2) below, where tax is chargeable on the supply ofgoods to, or the importation of goods by, a person constructing a buildinglawfully and otherwise than in the course or furtherance of any business,and—

(a) the goods are incorporated in the building or its site; and

(b) the supply of the goods would have been zero-rated by virtue of item 3 ofGroup 8 of Schedule 5 to this Act if they had been supplied by a suppliermaking to the same person supplies within item 2 of that Group of servicesincluding their use or installation, and any required certificate had beengiven,

the Commissioners shall, on a claim made in that behalf, refund to theperson the amount of the tax so chargeable.

(2) The Commissioners shall not be required to entertain a claim for a refundof tax under this section unless the claim—

(a) is made within such time and in such form and manner;

(b) contains such information; and

(c) is accompanied by such documents, whether by way of evidence or otherwise,

as the Commissioners may by regulations prescribe.”

6 (1) The following section shall be inserted in the M4 ValueAdded Tax Act 1983 after section 35—

“35A Buildings and land.

“35A (1) Schedule 6A to this Act shall have effect with respect to buildings andland.

(2) The Treasury may by order amend Schedule 6A to this Act.”

(2) The following Schedule shall be inserted in the Value Added Tax Act 1983after Schedule 6—

Section 35A.

“Schedule 6A U.K. Buildings and Land

Residential and charitable buildings: change of use etc. U.K.

1 (1) In this paragraph “relevant zero-rated supply” means a grant or other supplytaking place on or after 1st April 1989 which—

(a) relates to a building intended for use solely for a relevant residentialpurpose or a relevant charitable purpose or part of such a building; and

(b) is zero-rated, in whole or in part, by virtue of Group 8 of Schedule 5 tothis Act.

(2) Sub-paragraph (3) below applies where—

(a) one or more relevant zero-rated supplies relating to a building (or partof a building) have been made to any person;

(b) within the period of ten years beginning with the day on which thebuilding is completed, the person grants an interest in, right over or licenceto occupy the building or any part of it (or the building or any part of itincluding, consisting of or forming part of the part to which the relevantzero-rated supply or supplies related); and

(c) after the grant the whole or any part of the building, or of the part towhich the grant relates, (or the whole of the building or of the part to whichthe grant relates, or any part of it including, consisting of or forming partof the part to which the relevant zero-rated supply or supplies related) isnot intended for use solely for a relevant residential purpose or a relevantcharitable purpose.

(3) Where this sub-paragraph applies, to the extent that the grant relates toso much of the building as—

(a) by reason of its intended use gave rise to the relevant zero-rated supplyor supplies; and

(b) is not intended for use solely for a relevant residential purpose or arelevant charitable purpose after the grant,

it shall be taken to be a taxable supply in the course or furtherance ofa business which is not zero-rated by virtue of Group 8 of Schedule 5 to thisAct (if it would not otherwise be such a supply).

(4) Sub-paragraph (5) below applies where—

(a) one or more relevant zero-rated supplies relating to a building (or partof a building) have been made to any person; and

(b) within the period of ten years beginning with the day on which thebuilding is completed, the person uses the building or any part of it (or thebuilding or any part of it including, consisting of or forming part of thepart to which the relevant zero-rated supply or supplies related) for apurpose which is neither a relevant residential purpose nor a relevantcharitable purpose.

(5) Where this sub-paragraph applies, his interest in, right over or licenceto occupy so much of the building as—

(a) by reason of its intended use gave rise to the relevant zero-rated supplyor supplies; and

(b) is used otherwise than for a relevant residential purpose or a relevantcharitable purpose,

shall be treated for the purposes of this Act as supplied to him for thepurpose of a business carried on by him and supplied by him in the course orfurtherance of the business when he first uses it for a purpose which isneither a relevant residential purpose nor a relevant charitable purpose.

(6) Where sub-paragraph (5) above applies—

(a) the supply shall be taken to be a taxable supply which is not zero-ratedby virtue of Group 8 of Schedule 5 to this Act (if it would not otherwise besuch a supply); and

(b) the value of the supply shall be such that the amount of tax chargeableon it is equal to the amount of the tax which would have been chargeable onthe relevant zero-rated supply (or, where there was more than one such supply,the aggregate amount which would have been chargeable on them) had so much ofthe building as is mentioned in sub-paragraph (5) above not been intended foruse solely for a relevant residential purpose or a relevant charitablepurpose.

Election to waive exemption U.K.

2 (1) Subject to sub-paragraphs (2) and (3) and paragraph 3 below, where anelection under this paragraph has effect in relation to any land, if and tothe extent that any grant made in relation to it at a time when the electionhas effect by the person who made the election, or where that person is a bodycorporate by that person or a relevant associate, would (apart from thissub-paragraph) fall within Group 1 of Schedule 6 to this Act, the grant shallnot fall within that Group.

(2) Sub-paragraph (1) above shall not apply in relation to a grant if thegrant is made in relation to—

(a) a building or part of a building intended for use as a dwelling or numberof dwellings or solely for a relevant residential purpose; or

(b) a building or part of a building intended for use solely for a relevantcharitable purpose, other than as an office.

(3) Sub-paragraph (1) above shall not apply in relation to a grant if—

(a) the grant is made to a registered housing association and the associationhas given to the grantor a certificate stating that the land is to be used(after any necessary demolition work) for the construction of a building orbuildings intended for use as a dwelling or number of dwellings or solely fora relevant residential purpose; or

(b) the grant is made to an individual and the land is to be used for theconstruction, otherwise than in the course or furtherance of a businesscarried on by him, of a building intended for use by him as a dwelling.

(4) Subject to the following provisions of this paragraph, no input tax on anysupply or importation which, apart from this sub-paragraph, would be allowableby virtue of the operation of this paragraph shall be allowed if the supplyor importation took place before the first day for which the election inquestion has effect.

(5) Subject to sub-paragraph (6) below, sub-paragraph (4) above shall notapply where the person by whom the election was made—

(a) has not, before the first day for which the election has effect, made inrelation to the land in relation to which the election has effect any grantfalling within Group 1 of Schedule 6 to this Act; or

(b) has before that day made in relation to that land a grant or grants sofalling but the grant, or all the grants,—

(i) were made in the period beginning with 1st April 1989 and ending with 31stJuly 1989; and

(ii) would have been taxable supplies but for the amendments made by Schedule3 to the Finance Act 1989.

(6) Sub-paragraph (5) above does not make allowable any input tax on suppliesor importations taking place before 1st August 1989 unless—

(a) it is attributable by or under regulations to grants made by the personon or after 1st April 1989 which would have been taxable supplies but for theamendments made by Schedule 3 to the Finance Act 1989; and

(b) the election has effect from 1st August 1989.

(7) Sub-paragraph (4) above shall not apply in relation to input tax on grantsor other supplies which are made in the period beginning with 1st April 1989and ending with 31st July 1989 if—

(a) they would have been zero-rated by virtue of item 1 or 2 of Group 8 ofSchedule 5 to this Act or exempt by virtue of item 1 of Group 1 of Schedule6 to this Act but for the amendments made by Schedule 3 to the Finance Act1989; and

(b) the election has effect from 1st August 1989.

3 (1) An election under paragraph 2 above shall have effect—

(a) from the beginning of the day on which the election is made or of anylater day specified in the election; or

(b) where the election is made before 1st November 1989, from the beginningof 1st August 1989 or of any later day so specified.

(2) An election under paragraph 2 above shall have effect in relation to anyland specified, or of a description specified, in the election.

(3) Where such an election is made in relation to, or to part of, a building(or planned building), it shall have effect in relation to the whole of thebuilding and all the land within its curtilage; and for the purposes of thissub-paragraph buildings linked internally or by a covered walkway, andparades, precincts and complexes divided into separate units, shall be takento be a single building (if they otherwise would not be).

(4) Where such an election is made in relation to agricultural land (includinga building on agricultural land), it shall have effect in relation to anyother agricultural land if that other land is not separated from it by—

(a) land which is not agricultural land; or

(b) agricultural land in separate ownership.

(5) For the purposes of sub-paragraph (4) above—

(a) land shall be taken not to be separated from other land if it is separatedfrom it only by a road, railway, river or something similar; and

(b) land is in separate ownership from land in relation to which an electionis made if the person by whom the election is made has no interest in, rightover or licence to occupy it and, where that person is a body corporate, norelevant associate has any such interest, right or licence.

(6) An election under paragraph 2 above shall be irrevocable and, except whereit is an election of a description specified in a notice published by theCommissioners, shall not have effect unless written notification of it isgiven to the Commissioners together with such information as the Commissionersmay require.

(7) Except where the Commissioners otherwise allow, a notification requiredunder sub-paragraph (6) above shall be given not later than the end of theperiod of thirty days beginning with the day on which the election is made.

(8) In paragraph 2 above and this paragraph “relevantassociate”, in relation to a body corporate by which an electionunder paragraph 2 above has been made in relation to any building or land,means a body corporate which under section 29 of this Act—

(a) was treated as a member of the same group as the body corporate by whichthe election was made at the time when the election first had effect;

(b) has been so treated at any later time when the body corporate by which theelection was made had an interest in, right over or licence to occupy thebuilding or land (or any part of it); or

(c) has been treated as a member of the same group as a body corporate withinparagraph (a) or (b) above or this paragraph at a time when that bodycorporate had an interest in, right over or licence to occupy the building orland (or any part of it).

(9) In paragraph 2 above “registered housing association”means a registered housing association within the meaning of the Housing Associations Act 1985 or Part VII of the Housing (Northern Ireland) Order 1981.

4 (1) This paragraph has effect where rent is payable in consideration of thegrant of an interest in, right over, or licence to occupy any building or landto which an election under paragraph 2 above relates (or any part of any suchbuilding or land).

(2) If—

(a) the rent relates to a period beginning before and ending on or after thefirst day for which the election has effect; and

(b) the grant for which the rent is consideration would, apart from thissub-paragraph, take place before that day,

the grant shall be treated as taking place on that day to the extent thatit is made for rent relating to the part of the period falling on or afterthat day.

(3) If—

(a) the rent relates to a period beginning on or after the first day for whichthe election has effect; and

(b) the grant for which the rent is consideration would, apart from thissub-paragraph, take place before that day,

the grant shall be treated as taking place on the first day of the periodto which the rent relates.

(4) If—

(a) the rent relates to a period beginning before the first day for which theelection has effect; and

(b) the grant for which the rent is consideration takes place on or after thatday,

tax shall not be chargeable on the grant by virtue of paragraph 2 aboveto the extent that it is made for rent relating to any time before that day.

(5) Where the rent is payable by a person in relation to a period when he isin occupation of a building completed before 1st August 1989 (or part of sucha building) or land of which he was in occupation immediately before thatdate, any tax which would be chargeable by virtue of paragraph 2 above on thegrant for which the rent is consideration—

(a) except in the case of a charity, shall be chargeable as if theconsideration were reduced by 50 per cent. if and to the extent that the rentrelates to or to any part of the year beginning on 1st August 1989 and endingon 31st July 1990; and

(b) in the case of a charity—

(i) shall be chargeable as if the consideration were reduced by 80 per cent.if and to the extent that the rent relates to or to any part of the yearbeginning on 1st August 1989 and ending on 31st July 1990;

(ii) shall be chargeable as if the consideration were reduced by 60 per cent.if and to the extent that the rent relates to or to any part of the yearbeginning on 1st August 1990 and ending on 31st July 1991;

(iii) shall be chargeable as if the consideration were reduced by 40 per cent.if and to the extent that the rent relates to or to any part of the yearbeginning on 1st August 1991 and ending on 31st July 1992; and

(iv) shall be chargeable as if the consideration were reduced by 20 per cent.if and to the extent that the rent relates to or to any part of the yearbeginning on 1st August 1992 and ending on 31st July 1993.

Developers of certain non-residential buildings etc. U.K.

5 (1) Paragraph 6 below shall apply on the first occasion during the periodbeginning with the day when the construction of a building or work withinsub-paragraph (2) below is first planned and ending ten years after thecompletion of the building or work on which a person who is a developer inrelation to the building or work—

(a) grants an interest in, right over or licence to occupy the building orwork (or any part of it) which is an exempt supply; or

(b) is in occupation of the building, or uses the work, (or any part of it)when not a fully taxable person (or, if a person treated under section 29 ofthis Act as a member of a group, when the representative member is not a fullytaxable person).

(2) Subject to sub-paragraph (3) below, the buildings and works within thissub-paragraph are—

(a) any building neither designed as a dwelling or number of dwellings norintended for use solely for a relevant residential purpose or a relevantcharitable purpose; and

(b) any civil engineering work, other than a work necessary for thedevelopment of a permanent park for residential caravans.

(3) A building or work is not within sub-paragraph (2) above if—

(a) construction of it was commenced before 1st August 1989; or

(b) a grant of the fee simple in it which falls within paragraph (a) (ii) or(iv) of item 1 of Group 1 of Schedule 6 to this Act has been made before theoccasion concerned.

(4) For the purposes of this paragraph a taxable person is, in relation to anybuilding or work, a fully taxable person throughout a prescribed accountingperiod if—

(a) at the end of that period he is entitled to credit for input tax on allsupplies to, and importations by, him in the period (apart from any on whichinput tax is excluded from credit by virtue of section 14(10) of this Act);or

(b) the building or work is not used by him at any time during the period in,or in connection with, making any exempt supplies of goods or services.

(5) Subject to sub-paragraph (6) below, in this paragraph and paragraph 6below “developer”, in relation to a building or work, meansany person who—

(a) constructs it;

(b) orders it to be constructed; or

(c) finances its construction,

with a view to granting an interest in, right over or licence to occupyit (or any part of it) or to occupying or using it (or any part of it) for hisown purposes.

(6) Where—

(a) a body corporate treated under section 29 of this Act as a member of agroup is a developer in relation to a building or work; and

(b) it grants an interest in, right over or licence to occupy the building orwork (or any part of it) to another body corporate which is treated under thatsection as a member of the group,

then, for the purposes of this paragraph and paragraph 6 below, as fromthe time of the grant any body corporate such as is mentioned in sub-paragraph(7) below shall be treated as also being a developer in relation to thebuilding or work.

(7) The bodies corporate referred to in sub-paragraph (6) above are any whichunder section 29 of this Act—

(a) was treated as a member of the same group as the body corporate making thegrant at the time of the grant;

(b) has been so treated at any later time when the body corporate by which thegrant was made had an interest in, right over or licence to occupy thebuilding or work (or any part of it); or

(c) has been treated as a member of the same group as a body corporate withinparagraph (a) or (b) above or this paragraph at a time when that bodycorporate had an interest in, right over or licence to occupy the building orwork (or any part of it).

6 (1) Where this paragraph applies the interest in, right over or licence tooccupy the building or work (or any part of it) held by the developer shallbe treated for the purposes of this Act as supplied to the developer for thepurpose of a business carried on by him and supplied by him in the course orfurtherance of the business on the last day of the prescribed accountingperiod during which it applies or, if later, of the prescribed accountingperiod during which the building or work becomes substantially ready foroccupation or use.

(2) The supply treated as made by sub-paragraph (1) above shall be taken tobe a taxable supply and the value of the supply shall be the aggregateof—

(a) the value of grants relating to the land on which the building or work isconstructed made or to be made to the developer, other than any grants to bemade for consideration in the form of rent the value of which cannot beascertained by the developer when the supply is treated as made; and

(b) the value of all the taxable supplies of goods and services, other thanany that are zero-rated, made or to be made for or in connection with theconstruction of the building or work.

(3) Where the value of a supply which, apart from this sub-paragraph, wouldbe treated as made by sub-paragraph (1) above would be less than£100,000, no supply shall be treated as made by that sub-paragraph.

General U.K.

7 Where the benefit of the consideration for the grant of an interest in,right over or licence to occupy land accrues to a person but that person isnot the person making the grant—

(a) the person to whom the benefit accrues shall for the purposes of this Actbe treated as the person making the grant; and

(b) to the extent that any input tax of the person actually making the grantis attributable to the grant it shall be treated as input tax of the personto whom the benefit accrues.

8 The Notes to Group 8 of Schedule 5 to this Act and Group 1 of Schedule 6to this Act apply in relation to this Schedule as they apply in relation totheir respective Groups but subject to any appropriate modifications.”

Marginal Citations

M4 1983 c. 55.

7 In section 42 (adjustment of consideration on changes in tax) of the M5 Value Added Tax Act 1983—

(a) the following subsection shall be inserted after subsection (1)—

“(1A) Subsection (1) above shall apply in relation to a tenancy or lease as itapplies in relation to a contract except that a term of a tenancy or leaseshall not be taken to provide that the rule contained in that subsection isnot to apply in the case of the tenancy or lease if the term does not referspecifically to value added tax or this section.”, and

(b) in subsection (2), the words “(including a change attributable tothe making of an election under paragraph 2 of Schedule 6A to thisAct)” shall be added at the end.

Marginal Citations

M5 1983 c. 55.

8 In section 45(4) (orders etc.) of the M6 Value Added TaxAct 1983, there shall be added after paragraph (c)—

“(d) an order under section 35A above, except one making only such amendmentsas are necessary or expedient in consequence of provisions of an order underthis Act which—

(i) vary Schedule 5 or Schedule 6 to this Act; but

(ii) are not within paragraph (c) above.”

Marginal Citations

M6 1983 c. 55.

9 In section 48 (interpretation) of the Value Added Tax Act 1983, after thedefinition of “Commissioners” there shall be inserted—

““fee simple”—

(a) in relation to Scotland, means the estate or interest of the proprietorof the dominium utile or, in the case of land not held on feudal tenure, theestate or interest of the owner;

(b) in relation to Northern Ireland, includes the estate of a person who holdsland under a fee farm grant;”.

10 In Schedule 1 (registration) to the Value Added Tax Act 1983—

(a) in paragraph 1 there shall be added at the end—

“(6) Where, apart from this sub-paragraph, an interest in, right over orlicence to occupy any land would under sub-paragraph (5) above be disregardedfor the purposes of sub-paragraph (1) above, it shall not be if it is suppliedon a taxable supply which is not zero-rated.”, and

(b) in paragraph 2 there shall be added at the end—

“(4) Where, apart from this sub-paragraph, an interest in, right over orlicence to occupy any land would under sub-paragraph (3) above be disregardedfor the purposes of sub-paragraph (1) above, it shall not be if it is suppliedon a taxable supply which is not zero-rated.”

11 In Schedule 2 (supplies of goods and services) to the Value Added Tax Act1983—

(a) in paragraph 4, for the word “granting” there shall be substitutedthe word “grant”,

(b) in paragraph 5(1), for the words “the goods” there shall besubstituted the word “goods”, and

(c) there shall be added at the end—

“8 (1) Subject to sub-paragraphs (2) and (3) below, paragraphs 5 to 7 above haveeffect in relation to land forming part of the assets of, or held or used forthe purposes of, a business as if it were goods forming part of the assets of,or held or used for the purposes of, a business.

(2) In the application of those paragraphs by virtue of sub-paragraph (1)above, references to transfer, disposition or sale shall have effect asreferences to the grant or assignment of any interest in, right over orlicence to occupy the land concerned.

(3) Except in relation to—

(a) the grant or assignment of a major interest; or

(b) a grant or assignment otherwise than for a consideration,

in the application of paragraph 5(1) above by virtue of sub-paragraph (1)above the reference to a supply of goods shall have effect as a reference toa supply of services.”

Commencement U.K.

12 (1) Subject to sub-paragraphs (2) and (3) and paragraph 13 below, theamendments made by paragraphs 1 to 4 of this Schedule shall have effect inrelation to grants, assignments and other supplies made on or after 1st April1989.

(2) Note 4(b) to Group 8 of Schedule 5 to the M7 Value AddedTax Act 1983 shall have effect in relation to grants, assignments and othersupplies made on or after 1st August 1989.

(3) In relation to grants and assignments made on or after 1st April 1989 butbefore 1st August 1989—

(a) that Group shall have effect as if the Notes to it included a Note in thesame terms as Note (1) to that Group as it had effect before the substitutionmade by paragraph 1 above, and

(b) Group 8A of that Schedule shall have effect as if the Notes to it includeda Note in the same terms as Note (5) to that Group as it had effect before theamendments made by paragraph 2 above.

(4) Paragraphs 5, 7, 8, 11 and 13(6) and (7) of this Schedule and paragraph6, so far as relating to section 35A(2) of, and paragraphs 2 to 7 of Schedule6A to, the Value Added Tax Act 1983, shall come into force on 1st August 1989.

(5) Subject to the preceding provisions of this paragraph, this Schedule shallcome into force on 1st April 1989.

Marginal Citations

M7 1983 c. 55.

13 (1) Subject to sub-paragraph (3) below, the amendments made by paragraphs 1and 2 of this Schedule shall not have effect in relation to a grant,assignment or other supply where—

(a) it is made in pursuance of a legally binding obligation to make it whichwas incurred before 21st June 1988, and

(b) if the Commissioners so require (whether before or after it is made), itis proved to their satisfaction by the production of documents made beforethat date that it is so made.

(2) Subject to sub-paragraph (3) below, the amendments made by paragraphs 1and 2 of this Schedule shall not have effect in relation to a grant orassignment of an interest in, or in any part of, a building or its sitewhere—

(a) the grant or assignment takes place before 21st June 1993,

(b) the person making the grant or assignment was under a legally bindingobligation incurred before 21st June 1988 to construct (or reconstruct) thebuilding or to construct any development of which it forms part (other thanan obligation to receive services or goods in the course of the constructionor reconstruction),

(c) if the Commissioners so require (whether before or after the grant orassignment is made), it is proved to their satisfaction by the production ofdocuments made before that date that he was under that obligation, and

(d) planning permission for the construction (or reconstruction) of thebuilding was granted before 21st June 1988.

(3) Where the grant or assignment is of a tenancy or lease—

(a) if a premium is payable, sub-paragraph (1) or (2) above shall apply onlyto the extent that it is made for consideration in the form of the premium;and

(b) if a premium is not payable, sub-paragraph (1) or (2) above shall applyonly to the extent that it is made for consideration in the form of the firstpayment of rent due under the tenancy or lease.

(4) The amendments made by paragraphs 1 and 2 of this Schedule shall not haveeffect in relation to a supply relating to a building or civil engineeringwork where—

(a) the supply takes place before 21st June 1993,

(b) the supply is made to the person constructing the building or work (orreconstructing the building),

(c) that person was under a legally binding obligation incurred before21st June 1988 to construct the building or work (or to reconstruct thebuilding) or to construct any development of which it forms part (other thanan obligation to receive services or goods in the course of the constructionor reconstruction),

(d) if the Commissioners so require (whether before or after the supply ismade), it is proved to their satisfaction by the production of documents madebefore that date that he was under that obligation,

(e) planning permission for the construction of the building or work (or thereconstruction of the building) was granted before 21st June 1988, and

(f) before the supply takes place the person constructing the building or work(or reconstructing the building) has given to the person making the supply acertificate in such form as may be specified in a notice published by theCommissioners stating that the supply is zero-rated (in whole or to the extentspecified in the certificate) by virtue of this sub-paragraph.

(5) Where a grant, assignment or other supply is zero-rated by virtue of thisparagraph, it is not a relevant zero-rated supply for the purposes ofparagraph 1 of Schedule 6A to the M8 Value Added Tax Act1983.

(6) Nothing in paragraphs 5 and 6 of that Schedule shall apply—

(a) in relation to a person who has constructed a building if he incurredbefore 21st June 1988 a legally binding obligation to make a grant orassignment of a major interest in, or in any part of, the building or itssite;

(b) in relation to a building or work if there was incurred before that datea legally binding obligation to make in relation to the building or work asupply within item 2 of Group 8 of Schedule 5 to the Value Added Tax Act 1983;

(c) in relation to a person who has constructed a building if—

(i) he incurred before that date a legally binding obligation to construct thebuilding or any development of which it forms part, and

(ii) planning permission for the construction of the building was grantedbefore that date,

except where that person does not make a grant or assignment of a majorinterest in, or in any part of, the building or its site before 21st June1993.

(7) If the Commissioners so require, proof of any of the matters specified insub-paragraph (6)(a), (b) or (c)(i) above shall be given to their satisfactionby the production of documents made before 21st June 1988.

Marginal Citations

M8 1983 c. 55.