The Value Added Tax Regulations 1995

Period of adjustment U.K.

114.  —

(1) The proportion (if any) of the total input tax on a capital item which may be deducted under Part XIV shall be subject to adjustments in accordance with the provisions of this Part.

(2) Adjustments shall be made over a period determined in accordance with the following paragraphs of this regulation.

[F1 (3) Subject to paragraphs (3A) and (3B), the period of adjustment is—

(a) 10 successive intervals in the case of a capital item of a description falling within regulation 113(2)(a) to (c);

(b) 5 successive intervals in the case of a capital item of a description falling within regulation 113(2)(d) to (f),

determined in accordance with paragraphs (4) to (5B) and (7).

(3A) If, at the time of the owner’s first use, the number of intervals specified in paragraph (3)(a) or (b) (as may be the case) exceeds the number of complete years that the owner’s interest in the capital item has to run by more than one, the number of intervals shall be reduced to one more than the number of complete years that the owner’s interest has to run calculated from the date of the owner’s first use of the item (but not to less than three intervals).

(3B) Where the owner’s interest falls within regulation 112(3), the number of intervals shall be the same as the numerator of the fraction in [F2 paragraph 37(3)] of Schedule 10 to the Act [F3 divided by 12 and rounded up to the next whole number].

(3C) Where paragraph (3A) or (3B) applies, the relevant denominator in regulation 115(1) shall be adjusted accordingly.

(3D) Where a person who registers for VAT already owns an item of a description falling within regulation 113, for the purposes of calculating the period of adjustment—

(a) one complete interval shall be deducted for each complete year which has elapsed since the date of that person’s first use of the capital item prior to the date of VAT registration, and

(b) the first interval applicable to the capital item which ends after the date of VAT registration shall be treated as a subsequent interval for the purposes of regulation 115(1).

(4) Subject to paragraphs (5A), (5B) and (7), the first interval applicable to a capital item shall commence on the day on which the owner first uses the capital item and shall end on the day before the start of his next tax year whether or not this is his first tax year.]

(5) Subject to [F4 paragraphs (5A), (5B) and (7)] below, each subsequent interval applicable to a capital item shall correspond with a longer period applicable to the owner, or if no longer period applies to him, a tax year of his.

[F5 (5A) On the first occasion during the period of adjustment applicable to a capital item that the owner of the item—

(a) being a registered person subsequently becomes a member of a group under section 43 of the Act;

(b) being a member of a group under section 43 ceases to be a member of that group (whether or not he becomes a member of another such group immediately thereafter); or

(c) transfers the item in the course of the transfer of his business or part of his business as a going concern (the item therefore not being treated as supplied) in circumstances where the new owner is not, under regulation 6(1) above, registered with the registration number of and in substitution for the transferor,

the interval then applying shall end on the day before he becomes a member of a group or the day that he ceases to be a member of the group or transfers the business or part of the business (as the case may require) and thereafter each subsequent interval (if any) applicable to the capital item shall end on the successive anniversaries of that day.

(5B) Where the extent to which a capital item is used in making taxable supplies does not change between what would, but for this paragraph, have been the first interval and the first subsequent interval applicable to it and the length of the two intervals taken together does not exceed 12 months the first interval applicable to the capital item shall end on what would have been the day that the first subsequent interval expired.]

F6 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F7 (7) Where the owner of a capital item transfers it during the period of adjustment applicable to it in the course of the transfer of his business or a part of his business as a going concern (the item therefore not being treated as supplied) and the new owner is, under regulation 6(1) above, registered with the registration number of, and in substitution for the transferor, the interval applying to the capital item at the time of the transfer shall end on the last day of the longer period applying to the new owner immediately after the transfer or, if no longer period then applies to him, shall end on the last day of his tax year following the day of transfer.]

Textual Amendments

F1 Reg. 114(3), (3A)-(3D), (4) substituted for reg. 114(3), (4) (1.1.2011) by The Value Added Tax (Amendment) (No. 4) Regulations 2010 (S.I. 2010/3022), regs. 1(1), 12 (with reg. 1(5))

F2 Words in reg. 114(3B) substituted (2.3.2011) by The Value Added Tax (Amendment) Regulations 2011 (S.I. 2011/254), regs. 1(1), 4(a) (with reg. 1(2))

F3 Words in reg. 114(3B) inserted (2.3.2011) by The Value Added Tax (Amendment) Regulations 2011 (S.I. 2011/254), regs. 1(1), 4(b) (with reg. 1(2))

F4 Words in reg. 114(5) substituted (3.7.1997) by The Value Added Tax (Amendment) (No.3) Regulations 1997 (S.I. 1997/1614), regs. 1, 11(c)

F5 Reg. 114(5A)(5B) inserted (3.7.1997) by The Value Added Tax (Amendment) (No.3) Regulations 1997 (S.I. 1997/1614), regs. 1, 11(d)

F6 Reg. 114(6) omitted (3.7.1997) by virtue of The Value Added Tax (Amendment) (No.3) Regulations 1997 (S.I. 1997/1614), regs. 1, 11(e)

F7 Reg. 114(7) substituted (3.7.1997) by The Value Added Tax (Amendment) (No.3) Regulations 1997 (S.I. 1997/1614), regs. 1, 11(f)

Commencement Information

I1 Reg. 114 in force at 20.10.1995, see reg. 1