Finance Act 1989

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 M1 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

M1 1983 c. 55.

7 In section 42 (adjustment of consideration on changes in tax) of the M2 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

M2 1983 c. 55.

8 In section 45(4) (orders etc.) of the M3 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

M3 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.”