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Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 1 — Supplementary charge to VAT

74

 

(d)   

a relevant condition is met.

      (2)  

In this Schedule “the date of the VAT change” means 1 January 2010.

      (3)  

For the cases in which a supply, other than the grant of a right to goods or

services, spans the date of the VAT change and the relevant conditions in

relation to such a supply, see paragraph 2.

5

      (4)  

For the cases in which a supply consisting of the grant of a right to goods or

services spans the date of the VAT change and the relevant conditions in

relation to such a supply, see paragraph 3.

      (5)  

Sub-paragraph (1) has effect subject to the exceptions made by or under Part

2 of this Schedule.

10

      (6)  

In this Schedule—

Part 3 contains provision about liability for, and the amount of, a

supplementary charge under this Schedule,

Part 4 contains special provision about listed supplies, and

Part 5 contains provision about administration and interpretation.

15

      (7)  

A supplementary charge under this Schedule is to be treated for all purposes

as if it were value added tax charged in accordance with VATA 1994.

Supply spanning the date of the VAT change

2     (1)  

For the purposes of this Schedule, a supply of goods or services spans the

date of the VAT change where—

20

(a)   

by virtue of the issue of a VAT invoice or the receipt of a payment by

the person making the supply (“the supplier”), the supply is treated

as taking place before the date of the VAT change, but

(b)   

the basic time of supply (see paragraph 4) is on or after the date of the

VAT change.

25

      (2)  

The relevant conditions are—

(a)   

in relation to a supply that is within sub-paragraph (1)(a) by virtue

of the issue of a VAT invoice, conditions A to D, and

(b)   

in relation to a supply that is within sub-paragraph (1)(a) by virtue

of the receipt of a payment, conditions A to C.

30

      (3)  

Condition A is that the supplier and the person to whom the supply is made

are connected with each other at any time in the period—

(a)   

beginning with the day on which the supply is treated as taking

place, and

(b)   

ending on the date of the VAT change.

35

      (4)  

Paragraph 5 modifies condition A in cases involving a series of supplies.

      (5)  

Condition B is that the aggregate of the following is more than £100,000—

(a)   

the relevant consideration for the supply, and

(b)   

the relevant consideration for every related supply of goods or

services (including every related grant of a right to goods or services)

40

that spans the date of the VAT change (see paragraph 6).

      (6)  

Condition C is that a prepayment in respect of the supply is financed by the

supplier or a person connected with the supplier (see paragraph 7).

 
 

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 1 — Supplementary charge to VAT

75

 

      (7)  

In sub-paragraph (6) “prepayment”, in respect of a supply, means a payment

that is received by the supplier before the basic time of supply.

      (8)  

Condition D is that full payment of the amount shown on the VAT invoice

referred to in sub-paragraph (1)(a) is not due before the end of the period of

6 months beginning with the date on which the invoice is issued.

5

      (9)  

This paragraph does not apply in relation to a supply consisting of the grant

of a right to goods or services (see paragraph 3).

Grant of right spanning the date of the VAT change

3     (1)  

For the purposes of this Schedule, a supply consisting of the grant by a

person (“the grantor”) of a right to goods or services spans the date of the

10

VAT change where—

(a)   

that supply is treated as taking place before the date of the VAT

change,

(b)   

the goods or services are to be supplied at a discount or free of

charge, and

15

(c)   

the basic time of supply for the supply of some or all of the goods or

services (see paragraph 4) is on or after the date of the VAT change.

      (2)  

In relation to the grant of the right, the relevant conditions are conditions A

to C.

      (3)  

Condition A is that the grantor and the person to whom the right is granted

20

are connected with each other at any time in the period—

(a)   

beginning with the day on which the supply consisting of the grant

of the right is treated as taking place, and

(b)   

ending on the date of the VAT change or, if the right is exercised

(entirely or partly) on a later date, that date (or, if more than one, the

25

first of those dates).

      (4)  

Paragraph 5 modifies condition A in cases involving a series of supplies.

      (5)  

Condition B is that the aggregate of the following is more than £100,000—

(a)   

the relevant consideration for the grant of the right, and

(b)   

the relevant consideration for every related supply of goods or

30

services (including every related grant of a right to goods or services)

that spans the date of the VAT change (see paragraph 6).

      (6)  

Condition C is that the payment made in respect of the grant of the right is

financed by the grantor or a person connected with the grantor (see

paragraph 7).

35

      (7)  

In this Schedule references to a right to goods or services include—

(a)   

any right or option with respect to such goods or services, and

(b)   

any interest deriving from such a right or option.

“Basic time of supply”

4     (1)  

In this Schedule the “basic time of supply” is the time given by subsection (2)

40

or (3) of section 6 of VATA 1994 (disregarding subsections (4) to (14) of that

section).

      (2)  

Sub-paragraph (1) does not apply in relation to listed supplies (see Part 4 of

this Schedule).

 
 

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 1 — Supplementary charge to VAT

76

 

Series of supplies

5     (1)  

This paragraph applies where—

(a)   

the supply or grant of a right referred to in paragraph 2 or 3 (“the

affected supply or grant”) is one of a series of supplies of, or grants

of a right to, the same or substantially the same goods or services,

5

and

(b)   

each of the supplies, and the grants of a right, in the series was or will

be made in the expectation that the affected supply or grant would

or will take place.

      (2)  

In condition A in paragraphs 2 and 3, the references to the supplier and the

10

grantor include any person who makes one of the supplies or grants one of

the rights in the series.

“Relevant consideration” and “related” supplies

6     (1)  

This paragraph applies for the purposes of condition B in paragraphs 2 and

3.

15

      (2)  

“Relevant consideration” means—

(a)   

in relation to a supply that is within paragraph 2(1) by virtue of the

issue of a VAT invoice, the amount shown on that invoice,

(b)   

in relation to a supply that is within paragraph 2(1) by virtue of the

receipt of a payment, the amount of that payment, and

20

(c)   

in relation to a grant of a right to goods or services within paragraph

3(1), the consideration for the grant of the right,

           

but does not include any amount in respect of VAT.

      (3)  

A supply within paragraph 2(1), or a grant of a right within paragraph 3(1),

is related to another such supply or grant if they are both made as part of the

25

same scheme.

      (4)  

“Scheme” includes any arrangements, transaction or series of transactions.

Financing

7     (1)  

This paragraph applies for the purposes of condition C in paragraphs 2 and

3.

30

      (2)  

A payment is financed by a person if, directly or indirectly, the person—

(a)   

provides funds to enable the person to whom the supply is made to

make the whole or part of the payment (whether the funds are

provided before or after the payment is made),

(b)   

procures the provision of such funds by another person,

35

(c)   

provides funds for discharging (in whole or in part) any liability that

has been or may be incurred by any person for or in connection with

raising funds to enable the person to whom the supply is made to

make the payment, or

(d)   

procures that any such liability is or will be discharged (in whole or

40

in part) by another person.

      (3)  

In sub-paragraph (2) the references to providing funds for a purpose are to—

(a)   

making a loan of funds that are or are to be used for that purpose,

(b)   

providing a guarantee or other security in relation to such a loan,

 
 

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 2 — Exceptions

77

 

(c)   

providing consideration for the issue of shares or other securities

issued wholly or partly for raising those funds,

(d)   

providing consideration for the acquisition by any person of any

such shares or securities, or

(e)   

any other transfer of assets or value as a consequence of which any

5

of those funds are made available for that purpose.

Connected persons

8          

Section 839 of ICTA (connected persons) applies for the purposes of this

Schedule.

Receipt of payments

10

9          

In this Schedule a reference to receipt of a payment by the person making a

supply or granting a right (however expressed) includes a reference to

receipt by a person to whom a right to receive it has been assigned.

Power to change relevant conditions

10    (1)  

The Treasury may by order amend this Part of this Schedule by adding,

15

modifying or omitting relevant conditions.

      (2)  

An order under this paragraph—

(a)   

may make different provision for different cases, and

(b)   

may make incidental or consequential amendments of this Schedule.

Supplies treated as taking place before 31 March 2009

20

11         

In relation to supplies treated as taking place before 31 March 2009, this

Schedule has effect as if—

(a)   

paragraphs 2(5), 3(5) and 6 (condition B) and all references to

condition B were omitted,

(b)   

in paragraph 2(6) (condition C), the words “or a person connected

25

with the supplier” were omitted, and

(c)   

in paragraph 3(6) (condition C), the words “or a person connected

with the grantor” were omitted.

Part 2

Exceptions

30

Letting etc of assets

12    (1)  

This paragraph applies in relation to a supply within paragraph 2 which

arises from the letting, hiring or rental of assets.

      (2)  

There is no supplementary charge under this Schedule if—

(a)   

the period to which the VAT invoice or payment referred to in

35

paragraph 2(1) relates does not exceed 12 months, and

(b)   

the VAT invoice is issued, or the payment is received, in accordance

with normal commercial practice in relation to the letting, hiring or

rental of such assets.

 
 

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 3 — Liability and amount

78

 

Condition B cases involving normal commercial practice

13         

There is no supplementary charge under this Schedule on a supply of goods

or services within paragraph 2 or a grant of a right to goods or services

within paragraph 3 if—

(a)   

the only relevant condition met is condition B, and

5

(b)   

the supply is made, or the right is granted, in accordance with

normal commercial practice in relation to the supply of, or the grant

of a right to, such goods or services.

Normal commercial practice

14         

In this Part of this Schedule “normal commercial practice” means normal

10

commercial practice at a time when an increase in the rate of VAT in force

under section 2 of VATA 1994 is not expected.

Further exceptions

15    (1)  

The Treasury may by order provide that there is no supplementary charge

under this Schedule on supplies (including grants of rights to goods or

15

services) of a description specified in the order.

      (2)  

An order under this paragraph may make provision having effect in relation

to supplies of goods or services that are treated as taking place on or after 25

November 2008 or a later date.

Part 3

20

Liability and amount

Liability

16    (1)  

A supplementary charge under this Schedule on a supply within paragraph

2—

(a)   

is a liability of the supplier (subject to sub-paragraph (3)), and

25

(b)   

becomes due on the date of the VAT change (rather than at the time

of supply).

      (2)  

A supplementary charge under this Schedule on a supply consisting of the

grant of a right to goods or services within paragraph 3—

(a)   

is a liability of the grantor (subject to sub-paragraph (3)), and

30

(b)   

becomes due on the first occasion on or after the date of the VAT

change on which the right is exercised (rather than at the time the

right is granted).

      (3)  

If, on the date on which the supplementary charge becomes due, the person

who would be liable to pay the charge under sub-paragraph (1) or (2)—

35

(a)   

is not a taxable person, but

(b)   

is treated as a member of a group under sections 43A to 43D of VATA

1994,

           

the supplementary charge is a liability of the representative member of the

group.

40

 
 

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 4 — Listed supplies

79

 

Amount

17    (1)  

The amount of the supplementary charge on a supply within paragraph 2 is

equal to the difference between—

(a)   

the amount of VAT chargeable on the supply apart from this

Schedule, and

5

(b)   

the amount of VAT that would be chargeable on the supply if it were

subject to VAT at the rate of 17.5%.

      (2)  

The amount of the supplementary charge on a grant of a right to goods or

services within paragraph 3 is equal to the difference between—

(a)   

the amount of VAT chargeable on the grant of the right apart from

10

this Schedule, and

(b)   

the amount of VAT that would be chargeable on the grant of the right

if it were subject to VAT at the rate of 17.5%,

           

(but see sub-paragraph (3)).

      (3)  

If the basic time of supply for some of those goods and services is before the

15

date of the VAT change, sub-paragraph (2) has effect as if the references to

the amount of VAT chargeable and to the amount of VAT that would be

chargeable were references to the relevant proportion of each of those

amounts.

(4)   The relevant proportion” is—

          P
          W

20

           

where—

P is so much of the consideration for the grant of the right as is

attributable on a just and reasonable basis to a right to the goods and

services for which the basic time of supply is on or after the date of

the VAT change, and

25

W is the whole of the consideration for the grant of the right.

Part 4

Listed supplies

“Listed supply”

18    (1)  

In this Schedule “listed supply” means a supply falling within sub-

30

paragraph (2)—

(a)   

which is made for a consideration the whole or part of which is

determined or payable periodically or from time to time, and

(b)   

which is treated as taking place by virtue of the issue of a VAT

invoice or the receipt of a payment by the person making the supply.

35

      (2)  

The following supplies fall within this sub-paragraph—

(a)   

a supply of services,

(b)   

a supply arising from the grant of a major interest in land,

(c)   

a supply of water other than—

(i)   

distilled water, deionised water or water of similar purity, or

40

(ii)   

bottled water,

(d)   

a supply of—

 
 

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 5 — Administration and interpretation

80

 

(i)   

coal gas, water gas, producer gases or similar gases, or

(ii)   

petroleum gases, or other gaseous hydrocarbons, in a

gaseous state,

(e)   

a supply of power, heat, refrigeration or ventilation, and

(f)   

a supply of goods together with services in the course of the

5

construction, alteration, demolition, repair or maintenance of a

building or civil engineering work.

      (3)  

The Treasury may by order amend sub-paragraph (2) by—

(a)   

adding or omitting any description of supply, or

(b)   

varying any description of supply for the time being listed in that

10

sub-paragraph.

“Basic time of supply”: listed supplies

19    (1)  

For the purposes of this Schedule, in relation to a listed supply, “the basic

time of supply” is the end of the period to which the VAT invoice or

payment mentioned in paragraph 18(1) relates, except as provided in sub-

15

paragraphs (2) and (4).

      (2)  

Where the person making the supply issues an invoice—

(a)   

in respect of part of the listed supply to which the VAT invoice or

payment mentioned in paragraph 18(1) relates, and

(b)   

for a period (a “billing period”) ending before the end of the period

20

to which that VAT invoice or payment relates,

           

“the basic time of supply”, in relation to that part of the supply, is the end of

the billing period.

      (3)  

For the purposes of sub-paragraph (2), the listed supply (and the

consideration for the supply) must be apportioned between periods on a just

25

and reasonable basis.

      (4)  

Where a listed supply is treated as taking place by virtue of—

(a)   

the issue by the person making the supply of a VAT invoice relating

to a premium for the grant of a tenancy or lease, or

(b)   

the receipt by the person making the supply of such a premium,

30

           

“the basic time of supply” is the date of the grant of the tenancy or lease.

Part 5

Administration and interpretation

Person ceasing to be taxable person before supplementary charge due

20    (1)  

This paragraph applies if, on the date on which a supplementary charge

35

under this Schedule becomes due (“the due date”), the person who is liable

to pay the charge under paragraph 14 is not a taxable person.

      (2)  

The supplementary charge must be accounted for by that person in

accordance with VATA 1994 (and regulations made under that Act) as if it

were VAT due in the last period for which the person was required to make

40

a return by or under VATA 1994.

      (3)  

If an amount assessed as due by way of supplementary charge under this

Schedule would (in the absence of this sub-paragraph) carry interest from a

 
 

 
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