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Finance (No.2) Bill


Finance (No.2) Bill
Part 2 — Value added tax

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Imported works of art etc

18      

Value of imported works of art etc: auctioneer’s commission

(1)   

Section 21 of VATA 1994 (value of imported goods) is amended as follows.

(2)   

In subsection (2) (value of imported goods to include taxes and expenses), after

“shall” insert “(subject to subsection (2A) below)”.

5

(3)   

After subsection (2) insert—

“(2A)   

Where—

(a)   

any goods falling within subsection (5) below are sold by

auction at a time when they are subject to the procedure

specified in subsection (2B) below, and

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(b)   

arrangements made by or on behalf of the purchaser of the

goods following the sale by auction result in the importation of

the goods from a place outside the member States,

   

the value of the goods shall not be taken for the purposes of this Act to

include, in relation to that importation, any commission or premium

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payable to the auctioneer in connection with the sale of the goods.

(2B)   

That procedure is the customs procedure for temporary importation

with total relief from import duties provided for in Articles 137 to 141

of Council Regulation 2913/92/EEC establishing the Community

Customs Code.”

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(4)   

Subsections (1) to (3) come into force on such day as the Treasury may by order

made by statutory instrument appoint.

Avoidance and fraud

19      

Missing trader intra-community fraud

(1)   

After section 55 of VATA 1994 (customers to account for tax on supplies of gold

25

etc) insert—

“55A    

Customers to account for tax on supplies of goods of a kind used in

missing trader intra-community fraud

(1)   

Subsection (3) applies if—

(a)   

a taxable (but not a zero-rated) supply of goods (“the relevant

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supply”) is made to a person (“the recipient”),

(b)   

the relevant supply is of goods to which this section applies (see

subsection (9)),

(c)   

the relevant supply is not an excepted supply (see subsection

(10)), and

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(d)   

the total value of the relevant supply, and of corresponding

supplies made to the recipient in the month in which the

relevant supply is made, exceeds £1,000 (“the disregarded

amount”).

(2)   

For this purpose a “corresponding supply” means a taxable (but not a

40

zero-rated) supply of goods which—

(a)   

is a supply of goods to which this section applies, and

 
 

Finance (No.2) Bill
Part 2 — Value added tax

21

 

(b)   

is not an excepted supply.

(3)   

The relevant supply, and the corresponding supplies made to the

recipient in the month in which the relevant supply is made, are to be

treated for the purposes of Schedule 1—

(a)   

as taxable supplies of the recipient (as well as taxable supplies

5

of the person making them), and

(b)   

in so far as the recipient is supplied in connection with the

carrying on by him of any business, as supplies made by him in

the course or furtherance of that business,

   

but the relevant supply, and those corresponding supplies, are to be so

10

treated only in so far as their total value exceeds the disregarded

amount.

(4)   

Nothing in subsection (3)(b) requires any supply to be disregarded for

the purposes of Schedule 1 on the grounds that it is a supply of capital

assets of the recipient’s business.

15

(5)   

For the purposes of subsections (1) and (3), the value of a supply is

determined on the basis that no VAT is chargeable on the supply.

(6)   

If—

(a)   

a taxable person makes a supply of goods to a person (“the

recipient”) at any time,

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(b)   

the supply is of goods to which this section applies and is not an

excepted supply, and

(c)   

the recipient is a taxable person at that time and is supplied in

connection with the carrying on by him of any business,

   

it is for the recipient, on the supplier’s behalf, to account for and pay tax

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on the supply and not for the supplier.

(7)   

The relevant enforcement provisions apply for the purposes of this

section, in relation to any person required under subsection (6) to

account for and pay any VAT, as if that VAT were VAT on a supply

made by him.

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(8)   

For this purpose “the relevant enforcement provisions” means so much

of—

(a)   

this Act and any other enactment, and

(b)   

any subordinate legislation,

   

as has effect for the purposes of, or in connection with the enforcement

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of, any obligation to account for and pay VAT.

(9)   

For the purposes of this section, goods are goods to which this section

applies if they are of a description specified in an order made by the

Treasury.

(10)   

For the purposes of this section, an “excepted supply” means a supply

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which is of a description specified in, or determined in accordance

with, provision contained in an order made by the Treasury.

(11)   

Any order made under subsection (10) may describe a supply of goods

by reference to—

(a)   

the use which has been made of the goods, or

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(b)   

other matters unrelated to the characteristics of the goods

themselves.

 
 

Finance (No.2) Bill
Part 2 — Value added tax

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(12)   

The Treasury may by order substitute for the sum for the time being

specified in subsection (1)(d) such greater sum as they think fit.

(13)   

The Treasury may by order make such amendments of any provision

of this Act as they consider necessary or expedient for the purposes of

this section or in connection with this section.

5

   

But no order may be made under this subsection on or after 22nd March

2009.

(14)   

Any order made under this section (other than one under subsection

(12)) may—

(a)   

make different provision for different cases, and

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(b)   

contain supplementary, incidental, consequential or

transitional provisions.”.

(2)   

After section 26A of VATA 1994 (disallowance of input tax where

consideration not paid) insert—

“26AB   

 Adjustment of output tax in respect of supplies under section 55A

15

(1)   

This section applies if—

(a)   

a person is, as a result of section 26A, taken not to have been

entitled to any credit for input tax in respect of any supply, and

(b)   

the supply is one in respect of which the person is required

under section 55A(6) to account for and pay VAT.

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(2)   

The person is entitled to make an adjustment to the amount of VAT

which he is so required to account for and pay.

(3)   

The amount of the adjustment is to be equal to the amount of the credit

for the input tax to which the person is taken not to be entitled.

(4)   

Regulations may make such supplementary, incidental, consequential

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or transitional provisions as appear to the Commissioners to be

necessary or expedient for the purposes of this section.

(5)   

Regulations under this section may in particular—

(a)   

make provision for the manner in which, and the period for

which, the adjustment is to be given effect,

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(b)   

require the adjustment to be evidenced and quantified by

reference to such records and other documents as may be

specified by or under the regulations,

(c)   

require the person entitled to the adjustment to keep, for such

period and in such form and manner as may be so specified,

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those records and documents,

(d)   

make provision for readjustments if any credit for input tax is

restored under section 26A.

(6)   

Regulations under this section may make different provision for

different circumstances.”.

40

(3)   

In section 97 of VATA 1994 (orders, rules and regulations), in subsection (4)

(orders which cease to have effect unless approved by House of Commons),

after paragraph (e) insert—

“(ea)   

an order under section 55A(13);”.

 
 

Finance (No.2) Bill
Part 2 — Value added tax

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(4)   

The amendments made by this section have effect in relation to supplies made

on or after such day as the Treasury may by order made by statutory

instrument appoint.

(5)   

An order under subsection (4) may contain transitional provision and savings.

20      

Power to inspect goods

5

(1)   

In Schedule 11 to VATA 1994 (administration, collection and enforcement),

paragraph 10 (entry and search of premises and persons) is amended as

follows.

(2)   

After sub-paragraph (2) (power to inspect premises and goods found on them)

insert—

10

   “(2A)  

The power under sub-paragraph (2) above to inspect any goods

includes, in particular,—

(a)   

power to mark the goods, or anything containing the goods,

for the purpose of indicating that they have been inspected,

and

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(b)   

power to record any information (which may be obtained by

electronic or any other means) relating to the goods that have

been inspected.”.

21      

Directions to keep records where belief VAT might not be paid

(1)   

VATA 1994 is amended as follows.

20

(2)   

After section 69A (breach of record-keeping requirements etc in relation to

transactions in gold) insert—

“69B    

Breach of record-keeping requirements imposed by directions

(1)   

If any person fails to comply with a requirement imposed under

paragraph 6A(1) of Schedule 11, the person is liable to a penalty.

25

(2)   

The amount of the penalty is equal to £200 multiplied by the number of

days on which the failure continues (up to a maximum of 30 days).

(3)   

If any person fails to comply with a requirement to preserve records

imposed under paragraph 6A(6) of Schedule 11, the person is liable to

a penalty of £500.

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(4)   

If it appears to the Treasury that there has been a change in the value of

money since—

(a)   

the day on which the Finance Act 2006 is passed, or

(b)   

(if later) the last occasion when the power conferred by this

subsection was exercised,

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they may by order substitute for the sums for the time being specified

in subsections (2) and (3) such other sums as appear to them to be

justified by the change.

(5)   

But any such order does not apply to a failure which began before the

date on which the order comes into force.

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(6)   

A failure by any person to comply with any requirement mentioned in

subsection (1) or (3) does not give rise to a liability to a penalty under

this section if the person concerned satisfies—

 
 

Finance (No.2) Bill
Part 2 — Value added tax

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(a)   

the Commissioners, or

(b)   

on appeal, a tribunal,

   

that there is a reasonable excuse for the failure.

(7)   

If by reason of conduct falling within subsection (1) or (3) a person—

(a)   

is assessed to a penalty under section 60, or

5

(b)   

is convicted of an offence (whether under this Act or otherwise),

   

that conduct does not also give rise to a penalty under this section.”.

(3)   

In section 76(1) (assessment of amounts due by way of penalty, interest or

surcharge) for “69A”, in both places, substitute “69B”.

(4)   

In section 83 (appeals)—

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(a)   

in paragraph (n) (penalties or surcharges by virtue of any of sections 59

to 69A) for “69A” substitute “69B”, and

(b)   

after paragraph (z) (conditions imposed by virtue of paragraph 2B(2)(c)

or 3(1) of Schedule 11) insert—

“(zza)   

a direction under paragraph 6A of Schedule 11;”.

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(5)   

In section 84 (further provision relating to appeals) after subsection (7A)

(appeals against directions mentioned in section 83(wa)) insert—

“(7B)   

Where there is an appeal against a decision to make such a direction as

is mentioned in section 83(zza)—

(a)   

the tribunal shall not allow the appeal unless it considers that

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the Commissioners could not reasonably have been satisfied

that there were grounds for making the direction;

(b)   

the direction shall have effect pending the determination of the

appeal.”.

(6)   

In Schedule 11 (administration, collection and enforcement), after paragraph 6

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(duty to keep records) insert—

“6A   (1)  

The Commissioners may direct any taxable person named in the

direction to keep such records as they specify in the direction in

relation to such goods as they so specify.

      (2)  

A direction under this paragraph may require the records to be

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compiled by reference to VAT invoices or any other matter.

      (3)  

The Commissioners may not make a direction under this paragraph

unless they have reasonable grounds for believing that the records

specified in the direction might assist in identifying taxable supplies

in respect of which the VAT chargeable might not be paid.

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      (4)  

The taxable supplies in question may be supplies made by—

(a)   

the person named in the direction, or

(b)   

any other person.

      (5)  

A direction under this paragraph—

(a)   

must be given by notice in writing to the person named in it,

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(b)   

must warn that person of the consequences under section 69B

of failing to comply with it, and

(c)   

remains in force until it is revoked or replaced by a further

direction.

 
 

Finance (No.2) Bill
Part 3 — Income tax, corporation tax and capital gains tax
Chapter 1 — Income tax and corporation tax: charge and rate bands

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      (6)  

The Commissioners may require any records kept in pursuance of

this paragraph to be preserved for such period not exceeding 6 years

as they may require.

      (7)  

Sub-paragraphs (4) to (6) of paragraph 6 (preservation of

information by means approved by the Commissioners) apply for

5

the purposes of this paragraph as they apply for the purposes of that

paragraph.

      (8)  

This paragraph is without prejudice to the power conferred by

paragraph 6(1) to make regulations requiring records to be kept.

      (9)  

Any records required to be kept by virtue of this paragraph are in

10

addition to any records required to be kept by virtue of paragraph

6.”.

22      

Treatment of credit vouchers

(1)   

VATA 1994 is amended as follows.

(2)   

In section 97 (orders, rules and regulations), in subsection (4) (orders which

15

cease to have effect unless approved by House of Commons), after paragraph

(f) insert—

“(fa)   

an order under paragraph 3(4) of Schedule 10A;”.

(3)   

In paragraph 3 of Schedule 10A (treatment of credit vouchers), after sub-

paragraph (3) (circumstances in which consideration for supply of credit

20

voucher not to be disregarded under sub-paragraph (2) for the purposes of

Act) insert—

    “(4)  

The Treasury may by order specify other circumstances in which

sub-paragraph (2) above does not apply.”.

Part 3

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Income tax, corporation tax and capital gains tax

Chapter 1

Income tax and corporation tax: charge and rate bands

Income tax

23      

Charge and rates for 2006-07

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Income tax shall be charged for the year 2006-07, and for that year—

(a)   

the starting rate shall be 10%;

(b)   

the basic rate shall be 22%;

(c)   

the higher rate shall be 40%.

Corporation tax

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24      

Charge and main rate for financial year 2007

Corporation tax shall be charged for the financial year 2007 at the rate of 30%.

 
 

 
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