The Value Added Tax Regulations 1995

Period of adjustment

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.

(3) The period of adjustment relating to a capital item of a description falling within—

(a) regulation 113(a) shall consist of 5 successive intervals,

(b) regulation 113(b), where the interest in the land, building or part of the building in question has less than 10 years to run at the time it is supplied to the owner, shall consist of 5 successive intervals, and

(c) any other description shall consist of 10 successive intervals,

determined in accordance with paragraphs (4) to (7) below.

(4) Subject to paragraphs (6) and (7) below, the first interval applicable to a capital item shall be determined as follows—

(a) where the owner is a registered person when he imports, acquires or is supplied with the item as a capital item, the first interval shall commence on the day of the importation, acquisition or supply and shall end on the day before the commencement of his tax year following that day;

(b) where the owner is a registered person when he appropriates to use an item as a capital item, the first interval shall commence on the day he first so uses it and shall end on the day before the commencement of his tax year following that day;

(c) where the capital item is of a description falling within regulation 113(c), the first interval shall commence on the day the owner’s interest in, right over, or licence to occupy, the building or part of the building is treated as supplied to him under paragraph 1(5) of Schedule 10 to the Act and shall end on the day before the commencement of his tax year following that day;

(d) where the capital item is of a description falling within regulation 113(d), the first interval shall commence on the later of the following days—

(i) 1st April 1990,

(ii) the day the owner first uses the building (or part of the building),

and shall end on the day before the commencement of his tax year following the day of commencement of the first interval;

(e) where the capital item is of a description falling within regulation 113(e) or (f), the first interval shall commence on the day the owner first uses the building or the altered building or the extension or annex in question, and shall end on the day before the commencement of his tax year following that day;

(f) where the owner is not a registered person when he first uses an item as a capital item, and subsequently—

(i) becomes a registered person, the first interval shall correspond with his registration period, or

(ii) is included among bodies treated as members of a group under section 43 of the Act, the first interval shall correspond with, or be that part still remaining of, the then current tax year of that group.

(5) Subject to paragraphs (6) 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.

(6) Where the owner of a capital item—

(a) is a registered person and subsequently becomes a member of a group under section 43 of the Act during the period of adjustment applicable to the capital item, the interval then applying to it shall end on the day before the owner is first so included and each subsequent interval (if any) applicable to the capital item shall end on the last day of a longer period applicable to that group, or if no longer period applies, shall end on the last day of a tax year of that group;

(b) ceases to be a member of such a group during the period of adjustment applicable to the capital item, the interval then applying to it shall end on the day that the owner so ceases and the next interval (if any) applicable to the capital item shall correspond with the registration period of the owner and each subsequent interval thereafter (if any) shall correspond with a longer period applying to the owner, or if no longer period applies, shall correspond with a tax year of the owner,

provided that if the owner of a capital item ceases to be a member of such a group (the first group) during the period of adjustment applicable to the capital item, and is immediately thereafter included in another such group (the second group), the interval applying to the capital item immediately before the owner ceases to be a member of the first group shall end on the day that the owner so ceases and each subsequent interval (if any) shall end on the last day of a longer period applicable to the second group, or if no longer period applies, shall end on the last day of a tax year of the second group.

(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 of part of his business as a going concern, the interval then applying to the capital item shall end on the day of the transfer, and each subsequent interval (if any) applicable to the capital item shall end on the last day of a longer period applying to the new owner or, if no longer period applies, shall end on the day before the commencement of a tax year of the new owner,

provided that where the new owner has, under regulation 6(1), been 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 not end on the day of the transfer (and shall accordingly 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 the transfer).