Finance (No. 2) Bill (HC Bill 190)

(3) Where (in a case not falling within sub-paragraph (1) or (2)) a
person who has made a relevant non-UK return notifies the
Commissioners (after the expiry of the period during which the
non-UK return may be amended under Article 61 of the
5Implementing Regulation) of a change that needs to be made to
the return to correct an error, or rectify an omission, in it, the
relevant non-UK return is taken for the purposes of this Act to
have been amended by that information.

(4) The Commissioners may by regulations—

(a) 10specify within what period and in what form and manner
notice is to be given under sub-paragraph (3);

(b) require notices to be supported by documentary evidence
described in the regulations.

Interest on VAT: “reckonable date”

24 (1) 15Sub-paragraph (2) states the “reckonable date” for the purposes of
section 74(1) and (2) for any case where an amount carrying
interest under that section—

(a) is an amount assessed under section 73(2) (refunds etc) in
reliance on paragraph 20, or that could have been so
20assessed, and

(b) was correctly paid or credited to the person, but would not
have been paid or credited to the person had the facts been
as they later turn out to be.

(2) The “reckonable date” is the first day after the end of the tax period
25in which the events occurred as a result of which the
Commissioners were authorised to make the assessment (that was
or could have been made) under section 73(2).

(3) Sub-paragraph (4) states the “reckonable date” for any other case
where an amount carrying interest under section 74 is assessed
30under section 74(1) or (2) in reliance on paragraph 20, or could
have been so assessed.

(4) The “reckonable date” is taken to be the latest date by which a non-
UK return was required to be made for the tax period to which the
amount assessed relates.

(5) 35Where section 74(1) or (2) (interest on VAT recovered or
recoverable by assessment) applies in relation to an amount
assessed under section 73(3A) (as inserted by paragraph 21(2)), the
“reckonable date” for the purposes of section 74(1) or (2) is taken
to be the day after the end of the tax period referred to in
40paragraph 31(2).

Default surcharge: notice of special surcharge period

25 (1) A person who is required to make a relevant non-UK return for a
tax period is regarded for the purposes of this paragraph and
paragraph 26 as being in default in respect of that period if
45either—

(a) conditions 1A and 2A are met, or

(b) conditions 1B and 2B are met;

(but see also paragraph 27).

(2) For the purposes of sub-paragraph (1)(a)—

(a) condition 1A is that the tax authorities for the
administering member State have not received the return
5by the deadline for submitting it;

(b) condition 2A is that those tax authorities have, in
accordance with Article 60a of the Implementing
Regulation, issued a reminder of the obligation to submit
the return.

(3) 10For the purposes of sub-paragraph (1)(b)—

(a) condition 1B is that, by the deadline for submitting the
return, the tax authorities for the administering member
State have received the return but have not received the
amount of VAT shown on the return as payable by the
15person in respect of the tax period;

(b) condition 2B is that those tax authorities have, in
accordance with Article 60a of the Implementing
Regulation, issued a reminder of the VAT outstanding.

(4) The Commissioners may serve on a person who is in default in
20respect of a tax period a notice (a “special surcharge liability
notice”) specifying a period—

(a) ending on the first anniversary of the last day of that tax
period, and

(b) beginning on the date of the notice.

(5) 25A period specified under sub-paragraph (4) is a “special surcharge
period”.

(6) If a special surcharge liability notice is served in respect of a tax
period which ends at or before the end of an existing special
surcharge period, the special surcharge period specified in that
30notice must be expressed as a continuation of the existing special
surcharge period (so that the existing period and its extension are
regarded as a single special surcharge period).

Further default after service of notice

26 (1) If a person on whom a special surcharge liability notice has been
35served—

(a) is in default in respect of a tax period ending within the
special surcharge period specified in (or extended by) that
notice, and

(b) has outstanding special scheme VAT for that tax period,

40the person is to be liable to a surcharge of the amount given by
sub-paragraph (2).

(2) The surcharge is equal to whichever is the greater of—

(a) £30, and

(b) the specified percentage of the person’s outstanding
45special scheme VAT for the tax period.

(3) The specified percentage depends on whether the tax period is the
first, second or third etc in the default period in respect of which

the person is in default and has outstanding special scheme VAT,
and is—

(a) for the first such tax period, 2%;

(b) for the second such tax period, 5%;

(c) for the third such tax period, 10%;

(d) 5for each such tax period after the third, 15%.

(4) “Special scheme VAT”, in relation to a person, means VAT that the
person is liable to pay to the tax authorities for the administering
member State under a non-UK special scheme in respect of
supplies of scheme services treated as made in the United
10Kingdom.

(5) A person has “outstanding special scheme VAT” for a tax period
if some or all of the special scheme VAT for which the person is
liable in respect of that period has not been paid by the deadline
for the person to submit a non-UK return for that period (and the
15amount unpaid is referred to in sub-paragraph (2)(b) as “the
person’s outstanding special scheme VAT” for the tax period).

Default surcharge: exceptions for reasonable excuse etc

27 (1) A person who would otherwise have been liable to a surcharge
under paragraph 26(1) is not to be liable to the surcharge if the
20person satisfies the Commissioners or, on appeal, the tribunal that,
in the case of a default which is material to the surcharge—

(a) the non-UK return or, as the case may be, the VAT shown
on that return, was despatched at such a time and in such
manner that it was reasonable to expect that it would be
25received by the tax authorities for the administering
member State within the appropriate time limit, or

(b) there is a reasonable excuse for the return or the VAT not
having been so despatched.

(2) Where sub-paragraph (1) applies to a person—

(a) 30the person is treated as not having been in default in
respect of the tax period in question, and

(b) accordingly, any special surcharge liability notice the
service of which depended on that default is regarded as
not having been served.

(3) 35A default is “material” to a surcharge if—

(a) it is the default which gives rise to the surcharge, under
paragraph 26(1), or

(b) it is a default which was taken into account in the service
of the special surcharge liability notice on which the
40surcharge depends and the person concerned has not
previously been liable to a surcharge in respect of a tax
period ending within the special surcharge period
specified in or extended by that notice.

(4) A default is left out of account for the purposes of paragraphs
4525(4) and 26(1) if—

(a) the conduct by virtue of which the person is in default is
also conduct falling within section 69(1) (breaches of
regulatory provisions), and

(b) by reason of that conduct the person concerned is assessed
5to a penalty under that section.

(5) If the Commissioners, after consultation with the Treasury, so
direct, a default in respect of a tax period specified in the direction
is to be left out of account for the purposes of paragraphs 25(4) and
26(1).

(6) 10Section 71(1) (meaning of “reasonable excuse”) applies for the
purposes of this paragraph as it applies for the purposes of
sections 59 to 70.

Interest in certain cases of official error

28 (1) Section 78 (interest in certain cases of official error) applies as
15follows in relation to a case where, due to an error on the part of
the Commissioners—

(a) a person has accounted under a non-UK special scheme for
an amount by way of UK VAT that was not UK VAT due
from the person, and as a result the Commissioners are
20liable under paragraph 29 to pay (or repay) an amount to
the person, or

(b) (in a case not falling within paragraph (a)), a person has
paid, in accordance with an obligation under a non-UK
special scheme, an amount by way of UK VAT that was not
25UK VAT due from the person and which the
Commissioners are in consequence liable to repay to the
person.

(2) Section 78 has effect as if the condition in section 78(1)(a) were met
in relation to that person.

(3) 30In the application of section 78 as a result of this paragraph, section
78(12)(b) is read as providing that any reference in that section to
a return is to a return required to be made under a non-UK special
scheme.

(4) In section 78, as it applies as a result of this section, “output tax”
35has the meaning that that expression would have if the reference
in section 24(2) to a “taxable person” were to a “person”.

Overpayments

29 (1) A person may make a claim if the person—

(a) has made a non-UK return for a tax period relating wholly
40or partly to supplies of scheme services treated as made in
the United Kingdom,

(b) has accounted to the tax authorities for the administering
member State for VAT in respect of those supplies, and

(c) in doing so has brought into account as UK VAT due to
45those authorities an amount (“the overpaid amount”) that
was not UK VAT due to them.

(2) A person may make a claim if the person has, as a participant in a
non-UK special scheme, paid (to the tax authorities for the
administering member State or to the Commissioners) an amount
by way of UK VAT that was not UK VAT due (“the overpaid
5amount”), otherwise than in the circumstances mentioned in sub-
paragraph (1)(c).

(3) A person who is or has been a participant in a non-UK special
scheme may make a claim if the Commissioners—

(a) have assessed the person to VAT for a tax period, and

(b) 10in doing so, have brought into account as VAT an amount
(“the amount not due”) that was not VAT due.

(4) Where a person makes a claim under sub-paragraph (1) or (2), the
Commissioners must repay the overpaid amount to the person.

(5) Where a person makes a claim under sub-paragraph (3), the
15Commissioners must credit the person with the amount not due.

(6) Where—

(a) as a result of a claim under sub-paragraph (3) an amount is
to be credited to a person, and

(b) after setting any sums against that amount under or by
20virtue of this Act, some or all of the amount remains to the
person’s credit,

the Commissioners must pay (or repay) to the person so much of
the amount as remains to the person’s credit.

(7) The reference in sub-paragraph (1) to a claim is to a claim made—

(a) 25by correcting, in accordance with Article 61 of the
Implementing Regulation, the error in the non-UK return
mentioned in sub-paragraph (1)(a), or

(b) (after the expiry of the period during which the non-UK
return may be amended under Article 61) to the
30Commissioners.

(8) Sub-paragraphs (1) and (2) do not require any amount to be repaid
except so far as that is required by Article 63 of the Implementing
Regulation.

Overpayments: supplementary

30 (1) 35In section 80—

(a) subsections (3) to (3C) (unjust enrichment), and

(b) subsections (4A), (4C) and (6) (recovery by assessment of
amounts wrongly credited),

have effect as if a claim under paragraph 29(1) were a claim under
40section 80(1), a claim under paragraph 29(2) were a claim under
section 80(1B) and a claim under paragraph 29(3) were a claim
under section 80(1A).

(2) In section 80(3) to (3C), (4A), (4C) and (6), as applied by sub-
paragraph (1)—

(a) 45references to the crediting of amounts are to be read as
including the payment of amounts;

(b) references to a prescribed accounting period include a tax
period.

(3) The Commissioners are not liable to repay the overpaid amount
on a claim made—

(a) 5under paragraph 29(2),or

(b) as mentioned in paragraph 29(7)(b),

if the claim is made more than 4 years after the relevant date.

(4) On a claim made under paragraph 29(3), the Commissioners are
not liable to credit the amount not due if the claim is made more
10than 4 years after the relevant date.

(5) The “relevant date” is—

(a) in the case of a claim under paragraph 29(1), the end of the
tax period mentioned in paragraph 29(1)(a), except in the
case of a claim resulting from an incorrect disclosure;

(b) 15in the case of a claim under paragraph 29(1) resulting from
an incorrect disclosure, the end of the tax period in which
the disclosure was made;

(c) in the case of a claim under paragraph 29(2), the date on
which the payment was made;

(d) 20in the case of a claim under paragraph 29(3), the end of the
quarter in which the assessment was made.

(6) A person makes an “incorrect disclosure” where—

(a) the person discloses to the tax authorities in question
(whether the Commissioners or the tax authorities for the
25administering member State) that the person has not
brought into account for a tax period an amount of UK
VAT due for the period (“the disclosed amount”),

(b) the disclosure is made in a later tax period, and

(c) some or all of the disclosed amount is not in fact VAT due.

30Increase or decrease in consideration for a supply

31 (1) This paragraph applies where—

(a) a person makes a non-UK return for a tax period (“the
affected tax period”) relating (wholly or partly) to a UK
supply, and

(b) 35after the return has been made the amount of the
consideration for the UK supply increases or decreases.

(2) The person must, in the tax period in which the increase or
decrease is accounted for in the person’s business accounts—

(a) amend the non-UK return to take account of the increase or
40decrease, or

(b) (if the period during which the person is entitled under
Article 61 of the Implementing Regulation to amend the
non-UK return has expired) notify the Commissioners of
the adjustment needed to the figures in the non-UK return
45because of the increase or decrease.

(3) Where the change to which an amendment or notice under sub-
paragraph (2) relates is an increase in the consideration for a UK

supply, the person must pay to the tax authorities for the
administering member State (in accordance with Article 62 of the
Implementing Regulation) or, in a case falling within sub-
paragraph (2)(b), the Commissioners, the difference between—

(a) the amount of VAT that was chargeable on the supply
5before the increase in consideration, and

(b) the amount of VAT that is chargeable in respect of the
whole of the increased consideration for the supply.

(4) Where the change to which an amendment or notice under sub-
paragraph (2) relates is a decrease in the consideration for a UK
10supply, the amendment or notice has effect as a claim; and where
a claim is made the Commissioners must repay any VAT paid by
the person that would not have been VAT due from the person
had the consideration for the supply always been the decreased
amount.

(5) 15The Commissioners may by regulations specify—

(a) the latest time by which, and the form and manner in
which, a claim or other notice under sub-paragraph (2)(b)
must be given;

(b) the latest time by which, and the form in which, a payment
20under sub-paragraph (3) must be made in a case within
sub-paragraph (2)(b).

(6) A payment made under sub-paragraph (3) in a case within sub-
paragraph (2)(a) must be made before the end of the tax period
referred to in sub-paragraph (2).

(7) 25In this paragraph “UK supply” means a supply of scheme services
that is treated as made in the United Kingdom.

Bad debts

32 Where a participant in a non-UK special scheme—

(a) has submitted a non-UK return to the tax authorities for
30the administering member State, and

(b) amends the return to take account of the writing-off as a
bad debt of the whole or part of the consideration for a
supply of scheme services that is treated as made in the
United Kingdom,

35the amending of the return may be treated as the making of a claim
to the Commissioners for the purposes of section 36(2) (bad debts:
claim for refund of VAT).

Records relating to supplies in UK

33 (1) A person who is a participant in a non-UK special scheme must
40keep records of the transactions which the person enters into for
the purposes of, or in connection with, relevant supplies.

(2) A supply made by a participant in a non-UK special scheme is a
“relevant supply” if—

(a) the value of the supply must be accounted for in a return
required to be made by the participant under the non-UK
special scheme, and

(b) the supply is treated as made in the United Kingdom.

(3) 5The records must be sufficiently detailed to enable the
Commissioners to determine whether any special scheme return
submitted in respect of the supplies is correct.

(4) The records must be made available on request to the
Commissioners by electronic means.

(5) 10Records must be kept for 10 years beginning with the 1 January
following the date on which the transaction was entered into.

Penalties for errors: disclosure

34 Where a person corrects a non-UK return in a way that constitutes
telling the tax authorities for the administering member State
15about—

(a) an inaccuracy in the return,

(b) a supply of false information, or

(c) a withholding of information,

the person is regarded as telling HMRC about that for the
20purposes of paragraph 9 of Schedule 24 to the Finance Act 2007.

Set-offs

35 Where a participant in a non-UK special scheme is liable to pay UK
VAT to the tax authorities for the administering member State in
accordance with the scheme, the UK VAT is regarded for the
25purposes of section 130(6) of the Finance Act 2008 (set-off:
England, Wales and Northern Ireland) as payable to the
Commissioners.

Part 5 Appeals

36 (1) 30An appeal lies to the tribunal with respect to any of the
following—

(a) a refusal to register a person under the Union scheme;

(b) the cancellation of the registration of any person under the
Union scheme;

(c) 35a refusal to make a repayment under paragraph 29
(overpayments), or a decision by the Commissioners as to
the amount of the repayment due under that provision;

(d) a refusal to make a repayment under paragraph 31(4)
(decrease in consideration);

(e) 40any liability to a surcharge under paragraph 26 (default
surcharge).

(2) Part 5 of this Act (appeals), and any order or regulations under
that Part, have effect as if an appeal under this paragraph were an

appeal which lies to the tribunal under section 83(1) (but not under
any particular paragraph of that subsection).

37 Where the Commissioners have made an assessment under
section 73 in reliance on paragraph 20 or 21—

(a) section 83(1)(p)(i): (appeals against assessments under
5section 73(1) etc) applies as if the relevant non-UK return
were a return under this Act, and

(b) the references in section 84(3) and (5) to the matters
mentioned in section 83(1)(p) are to be read accordingly.

Part 6 10Interpretation of Schedule

38 (1) In this Schedule—

• “administering member State”, in relation to a non-UK
  special scheme, has the meaning given by paragraph 14(2);

• “the Implementing Regulation” means Council
  15Implementing Regulation (EU) No 282/2011;

• “non-UK return” means a return required to be made, for a
  tax period, under a non-UK special scheme;

• “non-UK special scheme” has the meaning given by
  paragraph 14(1);

• 20“participant”, in relation to a non-UK special scheme, means
  a person who is identified under that scheme;

• “qualifying supply of scheme services” has the meaning
  given by paragraph 4(2);

• “relevant non-UK return” has the meaning given by
  25paragraph 20(3);

• “reporting period” is to be read in accordance with paragraph
  9(2);

• “scheme services” has the meaning given by paragraph 2;

• “tax period” means a period for which a person is required to
  30make a return under a non-UK special scheme;

• “UK VAT” means VAT in respect of supplies of scheme
  services treated as made in the United Kingdom;

• “Union scheme” has the meaning given by paragraph 3;

• “Union scheme return” has the meaning given by paragraph
  359(1).

(2) In relation to a non-UK special scheme (or a non-UK return),
references in this Schedule to “the tax authorities” are to the tax
authorities for the member State under whose law the non-UK
special scheme is established.

(3) 40References in this Schedule to a supply of scheme services being
“treated as made” in the United Kingdom are to its being treated
as made in the United Kingdom by paragraph 15 of Schedule 4A.”

Power to amend provisions about the Union scheme

2 In section 3A of VATA 1994 (supply of electronic services in member States:
45special accounting scheme)—

(a) in subsection (2), after “3B” insert “or 3BA”;

(b) in subsection (3), for “Schedule 3B” substitute “Schedules 3B and
3BA”.

Part 2 5Non-Union scheme: amendments of Schedule 3B to VATA 1994

Introduction

3 Schedule 3B to VATA 1994 (supply of electronic services in member States:
special accounting scheme) is amended in accordance with paragraphs 4 to
10.

10Extension of non-Union scheme to broadcasting and telecommunication services

4 For paragraph 3 (qualifying supplies) substitute—

“3 (1) In this Schedule “qualifying supply” means a supply of
electronically supplied services, telecommunication services or
broadcasting services to a person who—

(a) 15belongs in the United Kingdom or another member State,
and

(b) is not a relevant business person.

(2) In sub-paragraph (1)—

• “broadcasting services” means radio and television
  20broadcasting services;

• “electronically supplied services” has the same meaning as in
  Schedule 4A (see paragraph 9(3) and (4) of that Schedule);

• “telecommunication services” has the same meaning as in
  Schedule 4A (see paragraph 8(2) of that Schedule).”

5 25For the title of the Schedule substitute—

“Schedule 1 Electronic, telecommunication and broadcasting services: non-
Union scheme”.

Consequential and other amendments

6 (1) 30Part 1 of the Schedule (registration) is amended as follows.

(2) In paragraph 2 (persons who may be registered)—

(a) in sub-paragraph (6) for “Article 26c” substitute “Section 2 of Chapter
6 of Title XII of the VAT Directive”;

(b) for sub-paragraph (7) substitute—

“(7) 35In this Schedule “the VAT Directive” means Directive
2006/112/EC (Title XII of which is amended by Council
Directive 2008/8/EC).”

(3) In paragraph 4 (registration request)—

(a) in sub-paragraph (2) for “paragraph 9 below” substitute “Article 58b
40of Implementing Regulation (EU) No 282/2011”;