Finance Bill

Finance Bill - continued	House of Commons
PART IV, OTHER TAXES - continued
Interpretation of paragraph 1(6) and (7): meaning of - continued

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VAT: museums and galleries.

96. - (1) The Value Added Tax Act 1994 is amended as follows.

(2) After section 33 insert-

"Refunds of VAT to museums and galleries.	33A. - (1) Subsections (2) to (5) below apply where-
	(a) VAT is chargeable on-
	(i) the supply of goods or services to a body to which this section applies,
	(ii) the acquisition of any goods by such a body from another member State, or
	(iii) the importation of any goods by such a body from a place outside the member States,
	(b) the supply, acquisition or importation is attributable to the provision by the body of free rights of admission to a relevant museum or gallery, and
	(c) the supply is made, or the acquisition or importation takes place, on or after 1st April 2001.
	(2) The Commissioners shall, on a claim made by the body in such form and manner as the Commissioners may determine, refund to the body the amount of VAT so chargeable.
	(3) The claim must be made before the end of the claim period.
	(4) Subject to subsection (5) below, "the claim period" is the period of 3 years beginning with the day on which the supply is made or the acquisition or importation takes place.
	(5) If the Commissioners so determine, the claim period is such shorter period beginning with that day as the Commissioners may determine.
	(6) Subsection (7) below applies where goods or services supplied to, or acquired or imported by, a body to which this section applies that are attributable to free admissions cannot conveniently be distinguished from goods or services supplied to, or acquired or imported by, the body that are not attributable to free admissions.
	(7) The amount to be refunded on a claim by the body under this section shall be such amount as remains after deducting from the VAT related to the claim such proportion of that VAT as appears to the Commissioners to be attributable otherwise than to free admissions.
	(8) For the purposes of subsections (6) and (7) above-
	(a) goods or services are, and VAT is, attributable to free admissions if they are, or it is, attributable to the provision by the body of free rights of admission to a relevant museum or gallery;
	(b) the VAT related to a claim is the whole of the VAT chargeable on-
	(i) the supplies to the body, and
	(ii) the acquisitions and importations by the body,
	to which the claim relates.
	(9) The Treasury may by order-
	(a) specify a body as being a body to which this section applies;
	(b) when specifying a body under paragraph (a), specify any museum or gallery that, for the purposes of this section, is a "relevant" museum or gallery in relation to the body;
	(c) specify an additional museum or gallery as being, for the purposes of this section, a "relevant" museum or gallery in relation to a body to which this section applies;
	(d) when specifying a museum or gallery under paragraph (b) or (c), provide that this section shall have effect in the case of the museum or gallery as if in subsection (1)(c) there were substituted for 1st April 2001 a later date specified in the order.
	(10) References in this section to VAT do not include any VAT which, by virtue of any order under section 25(7), is excluded from credit under that section.".

(3) In section 63 (penalties for misdeclarations etc.), after subsection (9) insert-

	"(9A) This section shall have effect in relation to a body which is registered and to which section 33A applies as if-
	(a) any reference to a VAT credit included a reference to a refund under that section, and
	(b) any reference to credit for input tax included a reference to VAT chargeable on supplies, acquisitions or importations which were attributable to the provision by the body of free rights of admission to a museum or gallery that in relation to the body was a relevant museum or gallery for the purposes of section 33A.".

(4) Section 79 (repayment supplements) is amended in accordance with subsections (5) to (7).

(5) In subsection (1) (entitlement to supplement), after paragraph (b) insert-

	" , or
	(c) a body which is registered and to which section 33A applies is entitled to a refund under that section,".

(6) In subsection (5) (how supplement to be treated), after paragraph (b) insert-

	" , and
	(c) a supplement paid to any body under subsection (1)(c) shall be treated as an amount due to it by way of refund under section 33A.".

(7) In subsection (6)(b) (meaning of "requisite return or claim"), after "section 33" insert "or (as the case may be) the Commissioners' determination under, and the provisions of, section 33A.".

(8) In section 90(3) (VAT not to be refunded if it is repayable under the Provisional Collection of Taxes Act 1968), after "section 33," insert "33A,".

(9) In Note (9) of Group 14 of Schedule 9 (no entitlement to both exemption and refund), after "33," insert "33A,".

(10) Subject to subsection (11), this section comes into force on 1st September 2001.

(11) For the purpose only of the exercise of the power to make orders under the section 33A(9) inserted by this section, this section comes into force on the day on which this Act is passed.

VAT: re-enactment of reduced-rate provisions.

97. - (1) For the purpose of re-enacting the provisions of the Value Added Tax Act 1994 that provide for VAT on certain supplies, acquisitions and importations to be charged at a reduced rate of 5 per cent., that Act is amended as follows.

(2) In section 2(1) (VAT to be charged at the rate of 17.5 per cent.), after "Subject to the following provisions of this section" insert "and to the provisions of section 29A".

(3) Section 2(1A) to (1C) and Schedule A1 (which are superseded by the new section 29A and Schedule 7A) shall cease to have effect.

(4) In Part II (reliefs, exemptions and repayments), after the heading "Reliefs etc. generally available" insert-

"Reduced rate.	29A. - (1) VAT charged on-
	(a) any supply that is of a description for the time being specified in Schedule 7A, or
	(b) any equivalent acquisition or importation,
	shall be charged at the rate of 5 per cent.
	(2) The reference in subsection (1) above to an equivalent acquisition or importation, in relation to any supply that is of a description for the time being specified in Schedule 7A, is a reference (as the case may be) to-
	(a) any acquisition from another member State of goods the supply of which would be such a supply; or
	(b) any importation from a place outside the member States of any such goods.
	(3) The Treasury may by order vary Schedule 7A by adding to or deleting from it any description of supply or by varying any description of supply for the time being specified in it.
	(4) The power to vary Schedule 7A conferred by subsection (3) above may be exercised so as to describe a supply of goods or services by reference to matters unrelated to the characteristics of the goods or services themselves.
	In the case of a supply of goods, those matters include, in particular, the use that has been made of the goods.".

(5) After Schedule 7 insert the Schedule 7A set out in Part I of Schedule 30 to this Act.

(6) The consequential amendments in Part II of Schedule 30 to this Act have effect.

(7) The following provisions have effect in relation to supplies made, and acquisitions and importations taking place, on or after 1st November 2001-

(a) subsections (2) and (5),

(b) subsection (3) so far as providing for section 2(1A) and (1B), and Schedule A1, to cease to have effect, and

(8) Subsection (3), so far as providing for section 2(1C) to cease to have effect, comes into force on 1st November 2001.

(9) Subsection (6)-

(a) so far as relating to the amendments made by paragraphs 2 and 6(2) of Schedule 30 to this Act, has effect in relation to orders under section 2(2) of the Value Added Tax Act 1994 that make changes only in the rate of VAT that is in force at times on or after 1st November 2001;

(b) so far as relating to the amendment made by paragraph 3 of Schedule 30 to this Act, has effect in relation to supplies made, or to be made, on or after 1st November 2001.

VAT representatives.

98. - (1) In section 48 of the Value Added Tax Act 1994 (VAT representatives), in subsection (1) (directions requiring appointment of representative), for paragraph (b) substitute-

	"(b) is not established, and does not have any fixed establishment, in the United Kingdom;
	(ba) is established in a country or territory in respect of which it appears to the Commissioners that the condition specified in subsection (1A) below is satisfied; and".

(2) After that subsection insert-

	"(1A) The condition mentioned in subsection (1)(ba) above is that-
	(a) the country or territory is neither a member State nor a part of a member State, and
	(b) there is no provision for mutual assistance between the United Kingdom and the country or territory similar in scope to the assistance provided for between the United Kingdom and each other member State by the mutual assistance provisions.
	(1B) In subsection (1A) above "the mutual assistance provisions" means-
	(a) section 11 of the Finance Act 1977 (recovery of duty due etc. in other member States),
	(b) section 77 of the Finance Act 1978 (disclosure of tax information to tax authorities in other member States), and
	(c) Council Regulation (EEC) No. 218/92 of 27th January 1992 on administrative cooperation in the field of indirect taxation (VAT).".

(3) For subsection (2) of that section (power of taxable person to appoint representative) substitute-

	"(2) With the agreement of the Commissioners, a person-
	(a) who has not been required under subsection (1) above to appoint another person to act on his behalf in relation to VAT, and
	(b) in relation to whom the conditions specified in paragraphs (a), (b) and (c) of that subsection are satisfied,
	may appoint another person to act on his behalf in relation to VAT.
	(2A) In this Act "VAT representative" means a person appointed under subsection (1) or (2) above.".

(4) The amendments made by this section come into force on 31st December 2001.

Petroleum revenue tax

PRT: unrelievable field losses.

99. - (1) In section 6 of the Oil Taxation Act 1975 (allowance of unrelievable loss from abandoned field), for subsections (1) and (1A) substitute-

	"(1) In the case of a participator in an oil field, an allowable unrelievable field loss is the unrelievable portion of an allowable loss falling within subsection (1B) below.
	(1A) Subsection (1) above is subject to subsections (5) to (9) below and Schedule 8 to this Act.
	(1B) An allowable loss falls within this subsection if-
	(a) the loss accrued in any chargeable period from another field ("the abandoned field"),
	(b) the person to whom the loss accrued is-
	(i) the participator, or
	(ii) if the participator is a company, a company associated with the participator in respect of the loss (see subsection (3) below),
	(c) the loss accrued to that person as a participator in the abandoned field, and
	(d) the winning of oil from the abandoned field has permanently ceased.
	(1C) The "unrelievable portion" of an allowable loss falling within subsection (1B) above is so much of that loss as cannot under the provisions of section 7 of this Act be relieved against assessable profits accruing from the abandoned field to the person to whom the loss accrued.
	(1D) Subsection (1C) above is subject to Schedule 31 to the Finance Act 2001 (determination of unrelievable portion where Parts II and III of Schedule 17 to the Finance Act 1980 did not apply to transfer of interest in abandoned field).".

(2) In subsection (2) of that section, for "subsection (1) above" substitute "subsection (1B) above".

(3) In section 113(2) of the Finance Act 1984-

(a) for the words from "which, in the case" to "in subsection (1)" substitute "falling within subsection (1B)"; and

(b) for "from that other field" substitute "from the abandoned field".

(4) Schedule 31 to this Act has effect.

(5) The provisions of this section shall be deemed to have come into force on 7th March 2001.

PRT: allowable decommissioning expenditure.

100. - (1) In section 3 of the Oil Taxation Act 1975 (allowable expenditure), for subsections (1C) and (1D) (apportionment of decommissioning expenditure) substitute-

	"(1C) In any case where-
	(a) any expenditure incurred by a participator in a taxable field would, apart from this subsection, be allowable for the field under subsection (1)(i) or (j) above, and
	(b) the qualifying asset that is relevant to the incurring of that expenditure has at some time been used otherwise than in connection with the field,
	only the relevant portion of the expenditure is allowable for the field under subsection (1)(i) or (j) above.
	(1D) In subsection (1C) above "the relevant portion" of the expenditure is the portion of the expenditure that it is just and reasonable to apportion to use of the asset that is use in connection with the field.
	(1E) Subsections (1C) and (1D) above have effect subject to the transitional provisions in section 100(5) to (11) of the Finance Act 2001.".

(2) In subsection (6) of that section, for "subsection (1C) or subsection (1D)" substitute "subsections (1C) and (1D)".

(3) In section 10(2) of that Act (which, in particular, provides that although excluded oil is not oil for the purposes of section 3 of that Act it is oil for the purposes of section 3(1D)), for "subsection (1D)" substitute "subsections (1C) and (1D)".

(4) The amendments made by subsections (1) to (3) apply to expenditure incurred on or after 7th March 2001.

(5) Subsections (6) to (8) apply where-

(a) on or after 7th March 2001 a participator in a taxable field ("the transitional participator") incurs expenditure that falls to be apportioned under the new provision,

(b) the transitional participator was a participator in the field both immediately before, and at the beginning of, 7th March 2001,

(c) the qualifying asset that is relevant to the incurring of the expenditure was, at both of the times mentioned in paragraph (b), a qualifying asset in relation to the transitional participator and the field, and

(d) at a time before 7th March 2001-

(i) a person was a participator in two or more oil fields, and

(ii) the asset was a qualifying asset in relation to that person and each of at least two of those fields.

(6) If there would be no apportionment of the expenditure under the old provision, for the purpose of applying the new provision to the expenditure "the relevant portion" of the expenditure is the taxable field portion.

(7) If the expenditure would be apportioned between two or more oil fields under the old provision, for the purpose of applying the new provision to the expenditure "the relevant portion" of the expenditure is the portion of the taxable field portion which it is just and reasonable to apportion to use of the asset in connection with the field.

(8) In carrying out that apportionment of the taxable field portion, ignore use of the asset in connection with an oil field that is not one of the oil fields between which the expenditure would be apportioned under the old provision.

(9) In subsections (6) to (8) "the taxable field portion" means the portion of the expenditure that it is just and reasonable to apportion to use of the asset in connection with a taxable field.

(10) In subsections (5) to (8)-

"the new provision" means section 3(1C) of the Oil Taxation Act 1975 as substituted by subsection (1);

"the old provision" means section 3(1C) of that Act as it would have effect apart from the amendments made by subsections (1) to (3);

"qualifying asset" has the same meaning as it has for the purposes of the Oil Taxation Act 1983 (see section 8 of that Act).

(11) Subsections (5) to (10) shall be construed as one with Part I of the Oil Taxation Act 1975.

PRT: expenditure in certain gas-producing fields.

101. - (1) In section 10 of the Oil Taxation Act 1975 (modifications of Part I in connection with gas sold to the British Gas Corporation under contracts made before end of June 1975), for subsection (3) (modified apportionment rule for expenditure allowable under section 3(1)(a), (b), (c), (hh), (i) or (j)) substitute-

	"(3) Subsections (3A) to (3H) below apply where, in the case of any taxable field, the oil-
	(a) won and saved from the field, or
	(b) expected to be won and saved from the field,
	includes oil falling within subsection (1)(a) above.
	(3A) Any expenditure allowable under section 3 of this Act for the field by virtue of any of paragraphs (a) to (c) of section 3(1) of this Act shall be a proportion of what it would otherwise have been.
	(3B) The proportion mentioned in subsection (3A) above is that which, according to estimates submitted to the Secretary of State after the end of June 1975 and approved by him as reasonable, the field's original reserves of oil exclusive of oil falling within subsection (1)(a) above bear to the field's original reserves of oil inclusive of oil so falling.
	(3C) Until estimates have been submitted and approved for the purpose of subsection (3B) above, the expenditure allowable for the field under section 3 of this Act by virtue of section 3(1)(a), (b) or (c) of this Act shall be deemed to be nil.
	(3D) Any expenditure allowable under section 3 of this Act for the field by virtue of section 3(1)(hh) of this Act shall be a portion of what it would otherwise have been.
	(3E) That portion is determined in accordance with the following rules-
	1. Identify the abandonment guarantee (within the meaning given by section 104 of the Finance Act 1991) on the obtaining of which the expenditure was incurred.
	2. Identify the liabilities covered by the guarantee.
	3. Identify which of those liabilities relate to qualifying assets.
	4. Identify the portion of the expenditure that it is just and reasonable to apportion to the liabilities identified under rule 3.
	5. Identify the qualifying assets to which the liabilities identified under rule 3 relate.
	6. Identify the use of those qualifying assets that has been (or is expected to be) non-excluded use.
	7. Assume that expenditure is incurred on the provision of those qualifying assets and identify the proportion of the hypothetical expenditure that it would be just and reasonable to apportion to the use of those assets identified under rule 6.
	8. The portion mentioned in subsection (3D) above is then determined by multiplying-
	(i) the portion identified under rule 4, by
	(ii) the proportion (expressed as a fraction) identified under rule 7.
	(3F) Any expenditure allowable under section 3 of this Act for the field by virtue of section 3(1)(i) or (j) of this Act shall be a portion of what it would otherwise have been.
	(3G) That portion is determined in accordance with the following rules-
	1. Identify the qualifying asset that is relevant to the incurring of the expenditure.
	2. Identify the use of that qualifying asset that has been non-excluded use.
	3. Assume that expenditure is incurred on the provision of that qualifying asset and identify the proportion of the hypothetical expenditure that it would be just and reasonable to apportion to the use of that asset identified under rule 2.
	4. The portion mentioned in subsection (3F) above is then determined by multiplying-
	(i) the expenditure, by
	(ii) the proportion (expressed as a fraction) identified under rule 3.
	(3H) In subsections (3E) and (3G) above-
	"non-excluded use" means-
	(a) use in connection with the winning and saving of oil, other than excluded oil, from the field, or
	(b) use giving rise to receipts that, for the purposes of the Oil Taxation Act 1983, are tariff receipts attributable to a participator in the field;
	"qualifying asset" has the same meaning as it has for the purposes of the Oil Taxation Act 1983 (see section 8 of that Act).".

(2) The amendments made by this section apply to expenditure incurred on or after 7th March 2001.

Prepared 30 March 2001