Payment of VAT by taxable persons
24Input tax and output tax
(1)Subject to the following provisions of this section,“input tax”, in relation to a taxable person, means the following tax, that is to say—
(a)VAT on the supply to him of any goods or services;
(b)VAT on the acquisition by him from another member State of any goods; and
(c)VAT paid or payable by him on the importation of any goods from a place outside the member States,
being (in each case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him.
(2)Subject to the following provisions of this section,“output tax”, in relation to a taxable person, means VAT on supplies which he makes or on the acquisition by him from another member State of goods (including VAT which is also to be counted as input tax by virtue of subsection (1)(b) above).
(3)For the purposes of subsections (1) and (2) above, where goods or services are supplied to a company, goods are acquired by a company from another member State or goods are imported by a company from a place outside the member States and the goods or services which are so supplied, acquired or imported are used or to be used in connection with the provision of accommodation by the company, they shall not be treated as used or to be used for the purposes of any business carried on by the company to the extent that the accommodation is used or to be used for domestic purposes by—
(a)a director of the company, or
(b)a person connected with a director of the company.
(4)The Treasury may by order provide with respect to any description of goods or services that, where goods or services of that description are supplied to a person who is not a taxable person, they shall, in such circumstances as may be specified in the order, be treated for the purposes of subsections (1) and (2) above as supplied to such other person as may be determined in accordance with the order.
(5)Where goods or services supplied to a taxable person, goods acquired by a taxable person from another member State or goods imported by a taxable person from a place outside the member States 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, VAT on supplies, acquisitions and importations shall be apportioned so that only so much as is referable to his business purposes is counted as his input tax.
(6)Regulations may provide—
(a)for VAT on the supply of goods or services to a taxable person, VAT on the acquisition of goods by a taxable person from other member States and VAT paid or payable by a taxable person on the importation of goods from places outside the member States to be treated as his input tax only if and to the extent that the charge to VAT 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, VAT on the supply to him of goods or services or on the acquisition of goods by him from another member State or paid by him on the importation of goods from places outside the member States notwithstanding that he was not a taxable person at the time of the supply, acquisition or payment;
(c)for a taxable person that is a body corporate to count as its input tax, in such circumstances, to such extent and subject to such conditions as may be prescribed, VAT on the supply, acquisition or importation of goods before the company’s incorporation for appropriation to the company or its business or on the supply of services before that time for its benefit or in connection with its incorporation;
(d)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 VAT on a supply of services made to him for the purposes of the business carried on by him when he was a taxable person.
(7)For the purposes of this section“director” means—
(a)in relation to a company whose affairs are managed by a board of directors or similar body, a member of that board or similar body;
(b)in relation to a company whose affairs are managed by a single director or similar person, that director or person;
(c)in relation to a company whose affairs are managed by the members themselves, a member of the company,
and a person is connected with a director if that person is the director’s wife or husband, or is a relative, or the wife or husband of a relative, of the director or of the director’s wife or husband.
25Payment by reference to accounting periods and credit for input tax against output tax
(1)A taxable person shall—
(a)in respect of supplies made by him, and
(b)in respect of the acquisition by him from other member States of any goods,
account for and pay VAT by reference to such periods (in this Act referred to as“prescribed accounting periods”) at such time and in such manner as may be determined by or under regulations and regulations may make different provision for different circumstances.
(2)Subject to the provisions of this section, he is entitled at the end of each prescribed accounting period to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due from him.
(3)If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the output tax then, subject to subsections (4) and (5) below, 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; and an amount which is due under this subsection is referred to in this Act as a “VAT credit”.
(4)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.
(5)Where at the end of any period a VAT credit is due to a taxable person who has failed to submit returns for any earlier period as required by this Act, the Commissioners may withhold payment of the credit until he has complied with that requirement.
(6)A deduction under subsection (2) above and payment of a VAT credit shall not be made or paid 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 of a VAT credit shall be made subject to such conditions (if any) as the Commissioners think fit to impose, including conditions as to repayment in specified circumstances.
(7)The Treasury may by order provide, in relation to such supplies, acquisitions and importations as the order may specify, that VAT 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 acquired or imported, the person by whom they are supplied, acquired or imported or to whom they are supplied, the purposes for which they are supplied, acquired or imported, or any circumstances whatsoever; and
(b)such an order may contain provision for consequential relief from output tax.
26Input tax allowable under section 25
(1)The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for the period (that is input tax on supplies, acquisitions and importations in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below.
(2)The supplies within this subsection are the following supplies made or to be made by the taxable person in the course or furtherance of his business—
(a)taxable supplies;
(b)supplies outside the United Kingdom which would be taxable supplies if made in the United Kingdom;
(c)such other supplies outside the United Kingdom and such exempt supplies as the Treasury may by order specify for the purposes of this subsection.
(3)The Commissioners shall make regulations for securing a fair and reasonable attribution of input tax to supplies within subsection (2) above, and any such regulations may provide for—
(a)determining a proportion by reference to which input tax for any prescribed accounting period is to be provisionally attributed to those supplies;
(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;
(c)the making of payments in respect of input tax, by the Commissioners to a taxable person (or a person who has been a taxable person) or by a taxable person (or a person who has been a taxable person) to the Commissioners, in cases where events prove inaccurate an estimate on the basis of which an attribution was made; and
(d)preventing input tax on a supply which, under or by virtue of any provision of this Act, a person makes to himself from being allowable as attributable to that supply.
(4)Regulations under subsection (3) above 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.
27Goods imported for private purposes
(1)Where goods are imported by a taxable person from a place outside the member States and—
(a)at the time of importation they belong wholly or partly to another person; and
(b)the purposes for which they are to be used include private purposes either of himself or of the other,
VAT paid or payable by the taxable person on the importation of the goods shall not be regarded as input tax to be deducted or credited under section 25; but he may make a separate claim to the Commissioners for it to be repaid.
(2)The Commissioners shall allow the claim if they are satisfied that to disallow it would result, in effect, in a double charge to VAT; and where they allow it they shall do so only to the extent necessary to avoid the double charge.
(3)In considering a claim under this section, the Commissioners shall have regard to the circumstances of the importation and, so far as appearing to them to be relevant, things done with, or occurring in relation to, the goods at any subsequent time.
(4)Any amount allowed by the Commissioners on the claim shall be paid by them to the taxable person.
(5)The reference above to a person’s private purposes is to purposes which are not those of any business carried on by him.
28Payments on account of VAT
(1)The Treasury may make an order under this section if they consider it desirable to do so in the interests of the national economy.
(2)An order under this section may provide that a taxable person of a description specified in the order shall be under a duty—
(a)to pay, on account of any VAT he may become liable to pay in respect of a prescribed accounting period, amounts determined in accordance with the order, and
(b)to do so at such times as are so determined.
(3)Where an order is made under this section, the Commissioners may make regulations containing such supplementary, incidental or consequential provisions as appear to the Commissioners to be necessary or expedient.
(4)A provision of an order or regulations under this section may be made in such way as the Treasury or, as the case may be, the Commissioners think fit (whether by amending provisions of or made under the enactments relating to VAT or otherwise).
(5)An order or regulations under this section may make different provision for different circumstances.
29Invoices provided by recipients of goods or services
Where—
(a)a taxable person (“the recipient”) provides a document to himself which purports to be an invoice in respect of a taxable supply of goods or services to him by another taxable person; and
(b)that document understates the VAT chargeable on the supply,
the Commissioners may, by notice served on the recipient and on the supplier, elect that the amount of VAT understated by the document shall be regarded for all purposes as VAT due from the recipient and not from the supplier.