(3) A 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
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
25(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) 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 25(4) and
2026(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.

Interest in certain cases of official error

28 (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 non-UK special scheme for
an amount by way of UK VAT that was not UK VAT due
30from the person, and as a result the Commissioners are
liable 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
35special scheme, 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
40in relation to that person.

(3) In 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) 45In section 78, as it applies as a result of this section, “output tax”
has 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
or partly to supplies of scheme services treated as made in
5the 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
those authorities an amount (“the overpaid amount”) that
10was 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
15amount”), 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) 20in 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
25Commissioners 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
30virtue 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) 35by 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
40Commissioners.

(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) 45In 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
section 80(1), a claim under paragraph 29(2) were a claim under
5section 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) references to the crediting of amounts are to be read as
10including 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) 15under 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
20than 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) 25in 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) 30in 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
35administering 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.

40Increase 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) 45after 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
decrease, or

(b) 5(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
because of the increase or decrease.

(3) 10Where 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-
15paragraph (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
whole of the increased consideration for the supply.

(4) 20Where 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
the person that would not have been VAT due from the person
25had 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
which, a claim or other notice under sub-paragraph (2)(b)
30must 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) A payment made under sub-paragraph (3) in a case within sub-
35paragraph (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.

Bad debts

32 40Where a participant in a non-UK special scheme—

(a) has submitted a non-UK 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
45supply of scheme services that is treated as made in the
United Kingdom,

the 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) 5A person who is a participant in a non-UK special scheme must
keep 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) 10the 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) The records must be sufficiently detailed to enable the
15Commissioners 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) Records must be kept for 10 years beginning with the 1 January
20following 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
about—

(a) 25an 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
purposes of paragraph 9 of Schedule 24 to the Finance Act 2007.

30Set-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
purposes of section 130(6) of the Finance Act 2008 (set-off:
35England, Wales and Northern Ireland) as payable to the
Commissioners.

Part 5 Appeals

36 (1) An appeal lies to the tribunal with respect to any of the
40following—

(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) a refusal to make a repayment under paragraph 29
(overpayments), or a decision by the Commissioners as to
5the amount of the repayment due under that provision;

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

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

(2) 10Part 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
15section 73 in reliance on paragraph 20 or 21—

(a) section 83(1)(p)(i): (appeals against assessments under
section 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
20mentioned in section 83(1)(p) are to be read accordingly.

Part 6 Interpretation of Schedule

38 (1) In this Schedule—

• “administering member State”, in relation to a non-UK
  25special scheme, has the meaning given by paragraph 14(2);

• “the Implementing Regulation” means Council
  Implementing 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;

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

• “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
  35given by paragraph 4(2);

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

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

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

• “tax period” means a period for which a person is required to
  make 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;

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

• “Union scheme return” has the meaning given by paragraph
  9(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) 5References 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:
10special 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 15Non-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.

20Extension 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) 25belongs 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
  30broadcasting 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 35For the title of the Schedule substitute—

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

Consequential and other amendments

6 (1) 40Part 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) In this Schedule “the VAT Directive” means Directive
52006/112/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
of Implementing Regulation (EU) No 282/2011”;

(b) 10for sub-paragraph (5) substitute—

“(5) A registration request—

(a) must contain any further information, and any
declaration about its contents, that the
Commissioners may by regulations require;

(b) 15must be made by such electronic means, and in
such manner, as the Commissioners may direct or
may by regulations require.”

(4) Omit paragraph 5 (date on which registration takes effect) and the heading
before it.

(5) 20In paragraph 7 (obligation to notify changes)—

(a) omit sub-paragraphs (1) and (2);

(b) in sub-paragraph (3), for “this paragraph” substitute “Article 57h of
Implementing Regulation (EU) No 282/2011”.

(6) In paragraph 8 (cancellation of registration)—

(a) 25in sub-paragraph (1)(e), after “this Schedule” insert “or
Implementing Regulation (EU) No 282/2011”;

(b) omit sub-paragraphs (2) and (3).

(7) Omit paragraph 9 (registration after cancellation for persistent default) and
the heading before it.

(8) 30For the title substitute—

7 (1) Part 2 of the Schedule (obligations following registration, etc) is amended as
follows.

(2) In paragraph 10 (liability for VAT)—

(a) in sub-paragraph (2), at the end insert “(and the VAT is to be paid
35without any deduction of VAT pursuant to Article 168 of Directive
2006/112/EC)”;

(b) in sub-paragraph (3), omit “that would have been” and for the words
from “if the person” to the end substitute “(see paragraph 17(2))”;

(c) in sub-paragraph (4), omit “that would have been” and the words
40from “if the person” to the end;

(d) in sub-paragraph (5) omit paragraph (b) and the “and” before it.

(3) In paragraph 11 (obligation to submit special accounting returns)—

(a) in sub-paragraph (1), for “Controller” substitute “Commissioners”;

(b) omit sub-paragraphs (3) to (7).

(4) In paragraph 12 (further obligations with respect to special accounting
returns)—

(a) in sub-paragraph (1), for the words from “must” to the end substitute
5“is to be made out in sterling”;

(b) in sub-paragraph (3), for “Controller” substitute “Commissioners”.

(5) In paragraph 13 (payment of VAT), in sub-paragraph (1), for the words from
“at” to “respect of” substitute “by the deadline for submitting the return, pay
to the Commissioners the amount of VAT that the person is liable, in
10accordance with paragraph 10, to pay on qualifying supplies treated as
made by the person in”.

(6) In paragraph 15 (Commissioners’ power to request production of records),
in sub-paragraph (2)(b), for “Article 26c” substitute “Section 2 of Chapter 6
of Title XII of the VAT Directive”.

(7) 15After paragraph 15 insert—

“15A Section 44 of the Commissioners for Revenue and Customs Act
2005 (requirement to pay receipts into the Consolidated Fund)
does not apply to any money received for or on account of VAT
that is required to be paid to another member State under Article
2046 of Council Regulation (EU) No 904/2010.”

(8) For the title substitute—

8 For Part 3 of the Schedule (understatements and overstatements of UK VAT)
substitute—

“ Part 3 25Special schemes: collection etc of UK VAT

16 Assessments: general modifications of section 73

(1) For the purposes of this Schedule, section 73 (assessments:
incorrect returns etc) is to be read as if—

(a) the reference in subsection (1) of that section to returns
30required under this Act included relevant special scheme
returns, and

(b) references in that section to a prescribed accounting period
included a tax period.

(2) See also the modifications in paragraph 16A.

(3) 35In this Schedule “relevant special scheme return” means a special
scheme return that is required to be made (wholly or partly) in
respect of supplies of scheme services that are treated as made in
the United Kingdom.

16A Assessment in connection with increase in consideration

(1) Sub-paragraphs (2) to (4) make modifications of sections 73 and 76
which—

(a) have effect for the purposes of this Schedule, and

(b) 5are in addition to any other modifications of those sections
made by this Schedule.

(2) Section 73 has effect as if the following were inserted after
subsection (3) of that section—

“(3A) Where a person has failed to make an amendment or notification
10that the person is required to make under paragraph 16K of
Schedule 3B in respect of an increase in the consideration for a UK
supply (as defined in paragraph 16K(7)), the Commissioners may
assess the amount of VAT due from the person as a result of the
increase to the best of their judgement and notify it to the person.

(3B) 15An assessment under subsection (3A)—

(a) is of VAT due for the tax period mentioned in paragraph
16K(1)(a) of Schedule 3B;

(b) must be made within the time limits provided for in
section 77, and must not be made after the later of—

(i) 202 years after the end of the tax period referred to in
paragraph 16K(1)(a);

(ii) one year after evidence of facts sufficient in the
opinion of the Commissioners to justify making the
assessment comes to their knowledge.

(3C) 25Subject to section 77, where further evidence such as is mentioned
in subsection (3B)(b)(ii) comes to the Commissioners’ knowledge
after they have made an assessment under subsection (3A),
another assessment may be made under that subsection, in
addition to any earlier assessment.”

(3) 30The reference in section 73(9) to subsection (1) of that section is
taken to include a reference to section 73(3A) (as inserted by sub-
paragraph (2)).

(4) Section 76 (assessment of amounts due by way of interest etc) is to
be read as if the reference in subsection (5) of that section to section
3573(1) included a reference to section 73(3A) (as inserted by sub-
paragraph (2)).

16B Assessments: consequential modifications

References to prescribed accounting periods in the following
provisions are to be read in accordance with the modifications
40made by paragraphs 16 and 16A—

(a) section 74 (interest on VAT recovered or recoverable by
assessment);

(b) section 76 (assessment of amounts due by way of penalty,
interest or surcharge);

(c) 45section 77 (assessment: time limits).