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Finance Act 1977

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This is the original version (as it was originally enacted).

1For sections 2 to 6 of the 1972 Act (scope of tax, deduction of input tax, taxable persons, supply and self-supply) the following sections shall be substituted— "Scope of Tax

2(1)Tax shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.

(2)A person who makes or intends to make taxable supplies is a taxable person while he is or is required to be registered under this Part of this Act; and a taxable supply is a supply of goods or services made in the United Kingdom, other than an exempt supply.

(3)Tax on any supply of goods or services is a liability of the person making the supply and (subject to provisions about accounting and payment) becomes due at the time of supply.

(4)Tax on the importation of goods shall be charged and payable as if it were a duty of customs.

(5)Schedule 1 to this Act has effect with respect to registration. Credit for input tax against output tax.

3(1)A taxable person shall, in respect of supplies made by him, account for and pay tax by reference to such periods (" prescribed accounting periods"), at such time and in such manner as may be determined by or under regulations.

(2)Subject to the provisions of this section, he is entitled at the end of each such period to credit for so much of his input tax as is allowable under section 4 below, and then to deduct that amount from any output tax that is due from him.

(3)Subject to subsection (4), " input tax ", in relation to a taxable person, means the following tax, that is to say—

(a)tax on the supply to him of any goods or services ; and

(b)tax paid or payable by him on the importation of any goods,

being (in either case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him; and " output tax " means tax on supplies which he makes.

(4)Where goods or services supplied to a taxable person, or goods imported by him, are used or to be used partly for the purposes of a business carried on or to be carried on by him and partly for other purposes, tax on supplies and importations is apportioned so that only so much as is referable to his business purposes is counted as his input tax.

(5)If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the tax, then the amount of the credit or, as the case may be, the amount of the excess shall be paid to the taxable person by the Commissioners.

(6)But the whole or any part of the credit may, subject to and in accordance with regulations, be held over to be credited in and for a subsequent period ; and the regulations may allow for it to be so held over either on the taxable person's own application or in accordance with general or special directions given by the Commissioners from time to time.

(7)No deduction shall be made under subsection (2), nor shall any payment be made under subsection (5), except on a claim made in such manner and at such time as may be determined by or under regulations; and, in the case of a person who has made no taxable supplies in the period concerned or any previous period, payment under subsection (5) shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to repayment in specified circumstances.

(8)Regulations may provide—

(a)for tax on the supply of goods or services to a taxable person, or paid or payable by him on the importation of goods, to be treated as his input tax only if and to the extent that the charge to tax is evidenced and quantified by reference to such documents as may be specified in the regulations or the Commissioners may direct either generally or in particular cases or classes of cases;

(b)for a taxable person to count as his input tax, in such circumstances, to such extent and subject to such conditions as may be prescribed, tax on the supply to him, or paid by him on the importation, of goods notwithstanding that he was not a taxable person at the time of the supply or payment;

(c)in the case of a person who has been, but is no longer, a taxable person, for him to be paid by the Commissioners the amount of any tax on a supply of services made to him for the purposes of the business carried on by him when he was a taxable person.

(9)The Treasury may by order provide, in relation to such supplies and importations as the order may specify, that tax charged on them is to be excluded from any credit under this section ; and—

(a)any such provision may be framed by reference to the description of goods or services supplied or goods imported, the person by whom they are supplied or imported or to whom they are supplied, the purposes for which they are supplied or imported, or any circumstances whatsoever ; and

(b)such an order may contain provision for consequential relief from output tax. Input tax allowable under section 3.

4(1)The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be determined as follows—

(a)if his business is such that all his supplies are taxable supplies, there is allowable the whole of the input tax for the period (that is, input tax on supplies and importations in the period);

(b)if it is such that some but not all of his supplies are taxable supplies, there is allowable such proportion of the input tax for the period as, in accordance with regulations, is attributable to taxable supplies ; and

(c)if he has made no taxable supplies in that or any previous period of the business, there is allowable such proportion of the input tax for the period as the Commissioners consider in all the circumstances to be fair and reasonable.

(2)Regulations may provide for treating all supplies of goods or services by any person as taxable supplies—

(a)where the tax attributable to exempt supplies would be less than such amount, or less than such part of the whole of the input tax, as may be prescribed ; or

(b)in other prescribed circumstances.

(3)The Commissioners shall make regulations for securing a fair and reasonable attribution of input tax to taxable supplies, and any such regulations may provide for—

(a)determining a proportion of supplies in any prescribed accounting period which is to be taken as consisting of taxable supplies and provisionally attributing the input tax for that period in accordance with the proportion so determined;

(b)adjusting, in accordance with a proportion determined in like manner for any longer period comprising two or more prescribed accounting periods or parts thereof, the provisional attribution for any of those periods ; and

(c)dispensing with an adjustment where the amounts allowable for any such longer period in accordance with provisional and adjusted attributions do not differ by more than—

(i)an amount equal to such percentage (not exceeding 10 per cent.) of the input tax for that period as may be specified in the regulations ; or

(ii)such an amount (not exceeding £10) as may be so specified,

whichever is the greater.

(4)Regulations under subsection (3) may make different provision for different circumstances and, in particular (but without prejudice to the generality of that subsection) for different descriptions of goods or services ; and may contain such incidental and supplementary provisions as appear to the Commissioners necessary or expedient. Repayment of tax to those in business overseas.

5(1)The Commissioners may, by means of a scheme embodied in regulations, provide for the repayment, to persons to whom this section applies, of tax on supplies to them in the United Kingdom which would be input tax of theirs if they were taxable persons in the United Kingdom.

(2)This section—

(a)applies to persons carrying on business in a member State other than the United Kingdom, and

(b)shall apply also to persons carrying on business in other countries, if, pursuant to any Community Directive, rules are adopted by the Council of the Communities about refunds of tax to persons established elsewhere than in the member States,

but does not apply to persons carrying on business in the United Kingdom.

(3)Repayment shall be made in such cases only, and subject to such conditions, as the scheme may prescribe (being conditions specified in the regulations or imposed by the Commissioners either generally or in particular cases); and the scheme may provide—

(a)for claims and repayments to be made only through agents in the United Kingdom ;

(b)either generally or for specified purposes—

(i)for the agents to be treated under this Act as if they were taxable persons ; and

(ii)for treating claims as if they were returns under this Act and repayments as if they were repayments of input tax ; and

(c)for generally regulating the methods by which the amount of any repayment is to be determined and the repayment is to be made. Meaning of "supply": alteration by Treasury order.

6(1)Schedule 2 to this Act applies for determining what is, or is to be treated as, a supply of goods or a supply of services.

(2)Subject to any provision made by that Schedule and to Treasury orders under subsections (3) to (6) below—

(a)" supply " in this Part of this Act includes all forms of supply, but not anything done otherwise than for a consideration;

(b)anything which is not a supply of goods but is done for a consideration (including, if so done. the granting, assignment or surrender of any right) is a supply of services.

(3)The Treasury may by order provide with respect to any description of transaction—

(a)that it is to be treated as a supply of goods and not as a supply of services ; or

(b)that it is to be treated as a supply of services and not as a supply of goods ; or

(c)that it is to be treated as neither a supply of goods nor a supply of services ;

and without prejudice to the foregoing, such an order may provide that paragraph 5(3) of Schedule 2 to this Act is not to apply, in relation to goods of any prescribed description used or made available for use in prescribed circumstances, so as to make that a supply of services under that sub-paragraph.

(4)Without prejudice to subsection (3) above, the Treasury may by order make provision for securing, with respect to services of any description specified in the order, that where—

(a)a person carrying on a business does anything which is not a supply of services only because not done for a consideration, and would (if so done) be a supply of services of a description specified in the order ; and

(b)such other conditions as may be specified in the order are satisfied ;

such services are treated for the purposes of this Part of this Act as being supplied by him in the course or furtherance of that business.

(5)The Treasury may by order make provision for securing, subject to any exceptions provided for by or under the order, that where in such circumstances as may be specified in the order goods of a description so specified are acquired or produced by a person in the course or furtherance of a business carried on by him and—

(a)are neither supplied to another person nor incorporated in other goods produced in the course or furtherance of that business ; but

(b)are used by him for the purpose of a business carried on by him ;

the goods are treated for the purposes of this Part of this Act as being both supplied to him for the purpose of that business and supplied by him in the course or furtherance of it.

(6)The Treasury may by order make provision for securing, with respect to services of any description specified in the order, that where—

(a)a person, in the course or furtherance of a business carried on by him, does anything for the purpose of that business which is not a supply of services but would, if done for a consideration, be a supply of services of a description specified in the order ; and

(b)such other conditions as may be specified in the order are satisfied ;

such services are treated for the purposes of this Part of this Act as being both supplied to him for the purpose of that business and supplied by him in the course or furtherance of it.

(7)For the purposes of this section, where goods are manufactured or produced from any other goods those other goods shall be treated as incorporated in the first-mentioned goods.

(8)An order under subsection (4) or (6) above may provide for the method by which the value of any supply of services which is treated as taking place by virtue of the order is to be calculated.

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