Finance Bill (HC Bill 1)

16C Deemed amendments of relevant special scheme returns

(1) Where a person who has made a relevant special scheme return
makes a claim under paragraph 16I(7)(b) (overpayments) in
relation to an error in the return, the relevant special scheme
5return is taken for the purposes of this Act to have been amended
by the information in the claim.

(2) Where a person who has made a relevant special scheme return
gives the Commissioners a notice relating to the return under
paragraph 16K(2)(b) (increase or decrease in consideration), the
10relevant special scheme return is taken for the purposes of this Act
to have been amended by that information.

(3) Where (in a case not falling within sub-paragraph (1) or (2)) a
person who has made a relevant special scheme return notifies the
Commissioners (after the expiry of the period during which the
15non-UK return may be amended under Article 61 of the
Implementing Regulation) of a change that needs to be made to
the return to correct an error, or rectify an omission, in it, the
relevant special scheme return is taken for the purposes of this Act
to have been amended by that information.

(4) 20The Commissioners may by regulations—

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

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

16D 25Interest on VAT: “reckonable date”

(1) Sub-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
30reliance on paragraph 16, or that could have been so
assessed, 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) 35The “reckonable date” is the first day after the end of the tax period
in 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
40where an amount carrying interest under section 74 is assessed
under section 74(1) or (2) in reliance on paragraph 16, 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
45amount assessed relates.

(5) Where 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 16A(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
paragraph 16K(2).

16E 5Default surcharge: notice of special surcharge period

(1) A person who is required to make a relevant special scheme return
for a tax period is regarded for the purposes of this paragraph and
paragraph 16F as being in default in respect of that period if
either—

(a) 10conditions 1A and 2A are met, or

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

(but see also paragraph 16G).

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

(a) condition 1A is that the tax authorities for the
15administering member State have not received the return
by 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
20the return.

(3) For 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
25amount of VAT shown on the return as payable by the
person 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) 30The Commissioners may serve on a person who is in default in
respect 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) 35beginning on the date of the notice.

(5) A 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
40surcharge period, the special surcharge period specified in that
notice 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).

16F Further default after service of notice

(1) 45If a person on whom a special surcharge liability notice has been
served—

(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,

5the 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
10special 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) 15for the first such tax period, 2%;

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

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

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

(4) “Special scheme VAT”, in relation to a person, means VAT that the
20person is liable to pay to the tax authorities for the administering
member State under a special scheme in respect of supplies of
scheme services treated as made in the United Kingdom.

(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
25liable in respect of that period has not been paid by the deadline
for the person to submit a special scheme return for that period
(and the amount unpaid is referred to in sub-paragraph (2)(b) as
“the person’s outstanding special scheme VAT” for the tax
period).

16G 30Default surcharge: exceptions for reasonable excuse etc

(1) A person who would otherwise have been liable to a surcharge
under paragraph 16F(1) is not to be liable to the surcharge if the
person satisfies the Commissioners or, on appeal, the tribunal that,
in the case of a default which is material to the surcharge—

(a) 35the special scheme 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 received by the tax authorities for the
administering member State within the appropriate time
40limit, 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) the person is treated as not having been in default in
45respect 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) A default is “material” to a surcharge if—

(a) it is the default which gives rise to the surcharge, under
paragraph 16F(1), or

(b) it is a default which was taken into account in the service
5of the special surcharge liability notice on which the
surcharge 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) 10A default is left out of account for the purposes of paragraphs
16E(4) and 16F(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) 15by reason of that conduct the person concerned is assessed
to 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 16E(4)
20and 16F(1).

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

16H Interest in certain cases of official error

(1) 25Section 78 (interest in certain cases of official error) applies as
follows in relation to a case where, due to an error on the part of
the Commissioners—

(a) a person has accounted, under a special scheme, for an
amount by way of UK VAT that was not UK VAT due from
30the person, and as a result the Commissioners are liable
under paragraph 16I 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 special
35scheme, an amount by way of UK VAT that was not UK
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) 40In 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 special scheme.

(4) In section 78 in its application as a result of this section, “output
tax” has the meaning that that expression would have if the
45reference in section 24(2) to a “taxable person” were to a “person”.

16I Overpayments

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

(a) has made a special scheme return for a tax period relating
wholly or partly to supplies of scheme services treated as
5made in the United Kingdom,

(b) has accounted to the tax authorities for the administering
member State (whether that is the United Kingdom or
another member State) for VAT in respect of those
supplies, and

(c) 10in doing so has brought into account as UK VAT due to
those 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
special scheme, paid (to the tax authorities for the administering
15member State or to the Commissioners) an amount by way of UK
VAT that was not UK VAT due (“the overpaid amount”),
otherwise than in the circumstances mentioned in sub-paragraph
(1)(c).

(3) A person who is or has been a participant in a special scheme may
20make a claim if the Commissioners—

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

(b) in 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
25Commissioners must repay the overpaid amount to the person.

(5) Where a person makes a claim under sub-paragraph (3), the
Commissioners 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
30to be credited to a person, and

(b) after setting any sums against that amount under or by
virtue 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
35the amount as remains to the person’s credit.

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

(a) by 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) 40(after the expiry of the period during which the non-UK
return may be amended under Article 61) to the
Commissioners.

(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
45Regulation.

16J Overpayments: supplementary

(1) In section 80—

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

(b) subsections (4A), (4C) and (6) (recovery by assessment of
5amounts wrongly credited),

have effect as if a claim under paragraph 16I(1) were a claim under
section 80(1), a claim under paragraph 16I(2) were a claim under
section 80(1B) and a claim under paragraph 16I(3) were a claim
under section 80(1A).

(2) 10In section 80(3) to (3C), (4A), (4C) and (6), as applied by sub-
paragraph (1)—

(a) references 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
15period.

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

(a) under paragraph 16I(2),or

(b) as mentioned in paragraph 16I(7)(b),

20if the claim is made more than 4 years after the relevant date.

(4) On a claim made under paragraph 16I(3), the Commissioners are
not liable to credit the amount not due if the claim is made more
than 4 years after the relevant date.

(5) The “relevant date” is—

(a) 25in the case of a claim under paragraph 16I(1), the end of the
tax period mentioned in paragraph 16I(1)(a), except in the
case of a claim resulting from an incorrect disclosure;

(b) in the case of a claim under paragraph 16I(1) resulting
from an incorrect disclosure, the end of the tax period in
30which the disclosure was made;

(c) in the case of a claim under paragraph 16I(2), the date on
which the payment was made;

(d) in the case of a claim under paragraph 16I(3), the end of the
quarter in which the assessment was made.

(6) 35A 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
administering member State) that the person has not
brought into account for a tax period an amount of UK
40VAT 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.

16K Increase or decrease in consideration for a supply

(1) This paragraph applies where—

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

(b) after the return has been made the amount of the
5consideration 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 special scheme return to take account of the
increase or decrease, or

(b) 10(if the period during which the person is entitled under
Article 61 of the Implementing Regulation to amend the
special scheme return has expired) notify the
Commissioners of the adjustment needed to the figures in
the special scheme return because of the increase or
15decrease.

(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
20Implementing 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
before the increase in consideration, and

(b) the amount of VAT that is chargeable in respect of the
25whole 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
supply, the amendment or notice has effect as a claim; and where
a claim is made the Commissioners must repay any VAT paid by
30the person that would not have been VAT due from the person
had the consideration for the supply always been the decreased
amount.

(5) The Commissioners may by regulations specify—

(a) the latest time by which, and the form and manner in
35which, 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
under sub-paragraph (3) must be made in a case within
sub-paragraph (2)(b).

(6) 40A 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) In this paragraph “UK supply” means a supply of scheme services
that is treated as made in the United Kingdom.

16L 45Bad debts

Where a participant in a special scheme—

(a) has submitted a special scheme return to the tax authorities
for the 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,

5the 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).

16M Penalties for errors: disclosure

Where a person corrects a special scheme return in a way that
10constitutes telling the tax authorities for the administering
member State about—

(a) an inaccuracy in the return,

(b) a supply of false information, or

(c) a withholding of information,

15the person is regarded as telling HMRC about that for the
purposes of paragraph 9 of Schedule 24 to the Finance Act 2007.

16N Set-offs

Where a participant in a special scheme is liable to pay UK VAT to
the tax authorities for the administering member State in
20accordance with the scheme, the UK VAT is regarded for the
purposes of section 130(6) of the Finance Act 2008 (set-off:
England, Wales and Northern Ireland) as payable to the
Commissioners.”

9 (1) Part 4 of the Schedule (application of provisions relating to VAT) is amended
25as follows.

(2) Paragraph 17 (registration under VATA 1994) is renumbered as sub-
paragraph (1) of that paragraph.

(3) In that paragraph, after sub-paragraph (1) (as renumbered), insert—

“(2) Where a participant in the special scheme (“the scheme
30participant”) makes relevant supplies, it is to be assumed for all
purposes of this Act relating to the determination of—

(a) whether or not VAT is chargeable under this Act on those
supplies,

(b) how much VAT is chargeable under this Act on those
35supplies,

(c) the time at which those supplies are treated as taking place,
and

(d) any other matter that the Commissioners may specify by
regulations,

40that the scheme participant is registered under this Act.

(3) Supplies of scheme services made by the scheme participant are
“relevant supplies” if—

(a) the value of the supplies must be accounted for in a special
scheme return, and

(b) 45the supplies are treated as made in the United Kingdom.”

(4) In paragraph 18 (de-registration), in paragraph (b), for “Article 26c,”
substitute “Section 2 of Chapter 6 of Title XII of the VAT Directive,”.

(5) After paragraph 18 insert—

“Value of supplies to connected persons

18A 5In paragraph 1 of Schedule 6 (valuation: supply to connected
person at less than market value) the reference to a supply made
by a taxable person is to be read as including a supply of scheme
services that is made by a participant in the special scheme (and is
treated as made in the United Kingdom).”

(6) 10In paragraph 20 (appeals)—

(a) in sub-paragraph (1), for paragraphs (b) and (c) substitute—

“(b) a refusal to make a repayment under paragraph 16I
(overpayments), or a decision by the
Commissioners as to the amount of the repayment
15due under that provision;

(c) a refusal to make a repayment under paragraph
16K(4) (decrease in consideration);

(d) any liability to a surcharge under paragraph 16F
(default surcharge).”

(b) 20after sub-paragraph (2) insert—

“(3) Where the Commissioners have made an assessment
under section 73 in reliance on paragraph 16 or 16A—

(a) section 83(1)(p)(i): (appeals against assessments
under section 73(1) etc) applies as if the relevant
25special scheme 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.”

(7) 30Omit paragraph 21 (payments on account of non-UK VAT to other member
States) and the heading before it (but see paragraph 7(7) of this Schedule).

(8) For the title substitute—

10 (1) In Part 5 of the Schedule (supplementary), paragraph 23 (interpretation) is
amended as follows.

(2) 35In sub-paragraph (1)—

(a) for the words from ““Article 26c” to the end of the definition of “the
Controller” substitute—

• ““administering member State”, in relation to a special
  scheme, means the member State under whose law
  40the scheme is established (whether that is the United
  Kingdom or another member State);

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

(b) for the definition of “participant in the special scheme”, substitute—

• ““participant in the special scheme” means a person
  who—

  (a)

  is registered under this Schedule, or

  (b)

  5is identified under any provision of the law of
  another member State which implements
  Section 2 of Chapter 6 of Title XII of the VAT
  Directive;”

(c) after the definition of “registration request” insert—

• 10““relevant special scheme return” has the meaning
  given by paragraph 16(3);”

(d) after the definition of “reporting period” insert—

• ““scheme services” means electronically supplied
  services, broadcasting services or telecommunication
  15services (and in this definition “electronically
  supplied services”, “broadcasting services” and
  “telecommunication services” have the meaning
  given by paragraph 3(2));”

(e) after the definition of “special accounting return” insert—

• 20““special scheme” means—

  (a)

  the accounting scheme under this Schedule, or

  (b)

  any other scheme, under the law of another
  member State, implementing Section 2 of Title
  XII of Directive 2006/112/EC;

• 25“special scheme return” means—

  (a)

  a special accounting return, or

  (b)

  a value added tax return submitted to the tax
  authorities of another member State;

• “tax period” means—

  (a)

  30a reporting period (under the accounting
  scheme under this Schedule), or

  (b)

  any other period for which a person is
  required to make a return under a special
  scheme;

• 35“UK VAT” means VAT which a person is liable to pay
  (whether in the United Kingdom or another member
  State) in respect of qualifying supplies treated as
  made in the United Kingdom at a time when the
  person is or was a participant in the special scheme;

• 40“value added tax return”, in relation to another member
  State, means any value added tax return required to
  be submitted under any provision of the law of that
  member State which implements Article 364 of the
  VAT Directive (as substituted by Article 5(11) of
  45Council Directive 2008/8/EC);

• “the VAT Directive” has the meaning given by
  paragraph 2(7);”.

(3) In sub-paragraph (2)(a), for the words from “virtue” to “2002 VAT
Directive),” substitute “paragraph 15 of Schedule 4A (place of supply of
50electronic, telecommunication and broadcasting services),”.