Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 3 — Liability and amount
79

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
80

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—
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
81

(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 16 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

Finance Bill
Schedule 3 — VAT: supplementary charge and orders changing rate
Part 5 — Administration and interpretation
82

date earlier than the due date, it is to be treated as only carrying interest from
the due date.
Adjustment of contracts following the VAT change
21    (1)
This paragraph applies where—
(a)
a contract for the supply of goods or services is made before the date
5
of the VAT change, and
(b)
there is a supplementary charge under this Schedule on the supply.
      (2)
The consideration for the supply is to be increased by an amount equal to the
supplementary charge, unless the contract provides otherwise.
Invoices
10
22
Regulations under paragraph 2A of Schedule 11 to VATA 1994 (VAT
invoices) may make provision about the provision, replacement or
correction of invoices in connection with a supplementary charge under this
Schedule.
Orders under this Schedule
15
23    (1)
An order under this Schedule is to be made by statutory instrument.
      (2)
A statutory instrument containing an order under this Schedule is subject to
annulment in pursuance of a resolution of the House of Commons, unless it
is an instrument to which sub-paragraph (4) applies.
      (3)
Sub-paragraph (4) applies to a statutory instrument containing an order
20
made under paragraph 10 (or under that paragraph and under other
provisions) which extends the supplies that are subject to a supplementary
charge under this Schedule.
      (4)
An instrument to which this sub-paragraph applies—
(a)
must be laid before the House of Commons, and
25
(b)
ceases to have effect at the end of the period of 28 days beginning
with the day on which it was made unless it is approved during that
period by a resolution of the House of Commons.
      (5)
In reckoning the period of 28 days no account is to be taken of any time
during which Parliament is dissolved or prorogued or during which the
30
House of Commons is adjourned for more than 4 days.
      (6)
The order ceasing to have effect does not affect—
(a)
anything previously done under it, or
(b)
the making of a new order.
Interpretation: general
35
24    (1)
Expressions used in this Schedule and in VATA 1994 have the same meaning
in this Schedule as in that Act.
      (2)
In this Schedule—
(a)
“treated as taking place” means treated as taking place for the
purposes of the charge to VAT, and
40

Finance Bill
Schedule 4 — Vehicle excise duty: further provision about rates of duty etc
83

(b)
references to the person by or to whom a supply is made (however
expressed) are to the person by or to whom the supply is treated as
being made for the purposes of VATA 1994.
Part 6
Amendments of VATA 1994
5
25    (1)
VATA 1994 is amended as follows.
      (2)
In section 2(2) (orders increasing or decreasing rate of VAT), after “such
order” insert “that has not previously expired or been revoked”.
      (3)
In section 97 (orders, rules and regulations), after subsection (4) insert—
“(4A)
Where an order under section 2(2) is in force, the reference in
10
subsection (4)(c)(i) of this section to the rate of VAT in force under
section 2 at the time of the making of an order is a reference to the
rate which would be in force at that time if no such order had been
made.”
Schedule 4
15
Section 14

Vehicle excise duty: further provision about rates of duty etc
1
VERA 1994 is amended as follows.
2     (1)
Section 3 (duration of licences) is amended as follows.
      (2)
In subsection (4)(b), for “a licence taken out on the first registration under
this Act of” substitute “the first vehicle licence for”.
20
      (3)
Insert at the end—
“(7)
Neither subsection (2) nor any order under subsection (3) permits the
first vehicle licence for a vehicle to be taken out for a period of less
than twelve months if the annual rate of vehicle excise duty
chargeable on the licence would be lower if it were not the first
25
vehicle licence for the vehicle.”
3     (1)
Section 19 (rebates) is amended as follows.
      (2)
In subsection (1), for “from the Secretary of State the amount specified in
subsection (2)” substitute “the relevant amount from the Secretary of State”.
      (3)
Omit subsection (2).
30
      (4)
After subsection (3) insert—
“(3A)
Subject to subsection (3B), the relevant amount is an amount equal to
one-twelfth of the annual rate of duty chargeable on the licence (at
the time when it was taken out) in respect of each complete month of
the period of the currency of the licence which is unexpired when the
35
application is made.
(3B)
Where—
(a)
the licence is the first vehicle licence for the vehicle,

Finance Bill
Schedule 4 — Vehicle excise duty: further provision about rates of duty etc
84

(b)
the application is made by virtue of paragraph (d), (e) or (f) of
subsection (3), and
(c)
the annual rate of duty rate chargeable on the licence (at the
time when it was taken out) would have been lower if it had
not been the first vehicle licence for the vehicle,
5

the relevant amount is an amount equal to one-twelfth of that lower
annual rate of duty in respect of each such complete month.”
4     (1)
Section 62 (definitions) is amended as follows.
      (2)
In subsection (1), after the definition of “exempt vehicle” insert—
““first vehicle licence”, in relation to a vehicle, means (subject to
10
subsections (1B) and (1C)) the vehicle licence for the vehicle
on the issue of which the vehicle is first registered under this
Act (so that, if the vehicle is first registered on the issue of a
nil licence, there is no first vehicle licence in relation to it),”.
      (3)
After subsection (1A) insert—
15
(1B)
Where a vehicle is first registered under this Act on the issue of a
temporary licence, the “first vehicle licence” in relation to the vehicle
is the first vehicle licence subsequently issued for it.
(1C)
Where a vehicle—
(a)
has been registered under the law of a country or territory
20
outside the United Kingdom,
(b)
is first registered under this Act more than 6 months after the
time when it was first registered as mentioned in paragraph
(a), and
(c)
has travelled more than 6,000 kilometres under its own
25
power before it is first registered under this Act,

there is no first vehicle licence in relation to the vehicle.”
5     (1)
Schedule 1 (annual rates of duty) is amended as follows.
      (2)
In paragraph 1A (vehicles to which Part 1A applies)—
(a)
in sub-paragraph (1)(a), after “registered”, and
30
(b)
in sub-paragraph (5), after “registration”,

insert “, under this Act or under the law of a country or territory outside the
United Kingdom,”.
      (3)
In paragraph 1C (the reduced rate)—
(a)
in sub-paragraph (3)(a), after “registration” insert “, under this Act or
35
under the law of a country or territory outside the United
Kingdom,”,
(b)
in sub-paragraph (3)(b), for “its” substitute “that”, and
(c)
in sub-paragraph (4), after “registration” insert “under this Act”.
      (4)
In paragraph 1H (vehicles to which Part 1B applies)—
40
(a)
in sub-paragraph (1)(a), after “registered”, and
(b)
in sub-paragraph (3), after “registration”,

insert “, under this Act or under the law of a country or territory outside the
United Kingdom,”.

Finance Bill
Schedule 5 — Air passenger duty
85

      (5)
In paragraph 1K(a) (pre-2007 lower-emission vans), after “registered” insert
“, under this Act or under the law of a country or territory outside the United
Kingdom,”.
      (6)
In paragraph 1M(a) (post-2008 lower-emission vans), after “registered”
insert “, under this Act or under the law of a country or territory outside the
5
United Kingdom,”.
6     (1)
Paragraph 25 of Schedule 2 (exempt vehicles: light passenger vehicles with
low CO2 emissions) is re-numbered as sub-paragraph (1) of that paragraph.
      (2)
After that sub-paragraph insert—
    “(2)
A vehicle is an exempt vehicle for the appropriate period if—
10
(a)
it is a vehicle to which Part 1A of Schedule 1 applies, and
(b)
the applicable CO2 emissions figure (as defined in
paragraph 1A(3) and (4) of that Schedule) exceeds 100g/
km but does not exceed 130g/km.
      (3)
“The appropriate period” is the period for which (if the vehicle
15
were not an exempt vehicle by virtue of sub-paragraph (2)) the
first vehicle licence for the vehicle would (if taken out) have
effect.”
7     (1)
The amendments made by this Schedule have effect in relation to licences
taken out on or after 1 April 2010.
20
      (2)
But the amendments made by paragraph 5 do not have effect in relation to
vehicles first registered under this Act before that date.
Schedule 5
Section 17

Air passenger duty
Amendments
25
1
Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended as follows.
2     (1)
Section 30 (rates of duty) is amended as follows.
      (2)
After subsection (8) insert—
“(8A)
The Treasury may by order amend Schedule 5A.”
      (3)
Omit subsections (9) to (9B).
30
3
For section 39 substitute—
“39
Schemes for simplified operation of Chapter
(1)
This section applies if the Commissioners consider that, having
regard to difficulties encountered or expected to be encountered by
any registered operator in obtaining and recording information
35
about passengers and their journeys, it is appropriate for this
Chapter to have effect in relation to the registered operator in
accordance with a special accounting scheme.