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Value Added Tax Act 1994

Status:

This is the original version (as it was originally enacted).

Part IThe charge to tax

Imposition and rate of VAT

1Value added tax

(1)Value added tax shall be charged, in accordance with the provisions of this Act—

(a)on the supply of goods or services in the United Kingdom (including anything treated as such a supply),

(b)on the acquisition in the United Kingdom from other member States of any goods, and

(c)on the importation of goods from places outside the member States,

and references in this Act to VAT are references to value added tax.

(2)VAT 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.

(3)VAT on any acquisition of goods from another member State is a liability of the person who acquires the goods and (subject to provisions about accounting and payment) becomes due at the time of acquisition.

(4)VAT on the importation of goods from places outside the member States shall be charged and payable as if it were a duty of customs.

2Rate of VAT

(1)Subject to the following provisions of this section and paragraph 7 of Schedule 13, VAT shall be charged at the rate of 17.5 per cent. and shall be charged—

(a)on the supply of goods or services, by reference to the value of the supply as determined under this Act; and

(b)on the acquisition of goods from another member State, by reference to the value of the acquisition as determined under this Act; and

(c)on the importation of goods from a place outside the member States, by reference to the value of the goods as determined under this Act.

(2)The Treasury may by order increase or decrease the rate of VAT for the time being in force by such percentage thereof not exceeding 25 per cent. as may be specified in the order, but any such order shall cease to be in force at the expiration of a period of one year from the date on which it takes effect, unless continued in force by a further order under this subsection.

(3)In relation to an order made under subsection (2) above to continue, vary or replace a previous order, the reference in that subsection to the rate for the time being in force is a reference to the rate which would be in force if no order under that subsection had been made.

3Taxable persons and registration

(1)A person is a taxable person for the purposes of this Act while he is, or is required to be, registered under this Act.

(2)Schedules 1 to 3 shall have effect with respect to registration.

(3)Persons registered under any of those Schedules shall be registered in a single register kept by the Commissioners for the purposes of this Act; and, accordingly, references in this Act to being registered under this Act are references to being registered under any of those Schedules.

(4)The Commissioners may by regulations make provision as to the inclusion and correction of information in that register with respect to the Schedule under which any person is registered.

Supply of goods or services in the United Kingdom

4Scope of VAT on taxable supplies

(1)VAT 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 taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.

5Meaning of supply: alteration by Treasury order

(1)Schedule 4 shall apply 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 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(4) of Schedule 4 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 paragraph and may provide that paragraph 6 of that Schedule shall not apply, in such circumstances as may be described in the order, so as to make a removal of assets a supply of goods under that 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 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 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 taken possession of 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 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 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.

6Time of supply

(1)The provisions of this section shall apply, subject to section 18, for determining the time when a supply of goods or services is to be treated as taking place for the purposes of the charge to VAT.

(2)Subject to subsections (4) to (14) below, a supply of goods shall be treated as taking place—

(a)if the goods are to be removed, at the time of the removal;

(b)if the goods are not to be removed, at the time when they are made available to the person to whom they are supplied;

(c)if the goods (being sent or taken on approval or sale or return or similar terms) are removed before it is known whether a supply will take place, at the time when it becomes certain that the supply has taken place or, if sooner, 12 months after the removal.

(3)Subject to subsections (4) to (14) below, a supply of services shall be treated as taking place at the time when the services are performed.

(4)If, before the time applicable under subsection (2) or (3) above, the person making the supply issues a VAT invoice in respect of it or if, before the time applicable under subsection (2)(a) or (b) or (3) above, he receives a payment in respect of it, the supply shall, to the extent covered by the invoice or payment, be treated as taking place at the time the invoice is issued or the payment is received.

(5)If, within 14 days after the time applicable under subsection (2) or (3) above, the person making the supply issues a VAT invoice in respect of it, then, unless he has notified the Commissioners in writing that he elects not to avail himself of this subsection, the supply shall (to the extent that it is not treated as taking place at the time mentioned in subsection (4) above) be treated as taking place at the time the invoice is issued.

(6)The Commissioners may, at the request of a taxable person, direct that subsection (5) above shall apply in relation to supplies made by him (or such supplies made by him as may be specified in the direction) as if for the period of 14 days there were substituted such longer period as may be specified in the direction.

(7)Where any supply of goods involves both—

(a)the removal of the goods from the United Kingdom; and

(b)their acquisition in another member State by a person who is liable for VAT on the acquisition in accordance with provisions of the law of that member State corresponding, in relation to that member State, to the provisions of section 10,

subsections (2), (4) to (6) and (10) to (12) of this section shall not apply and the supply shall be treated for the purposes of this Act as taking place on whichever is the earlier of the days specified in subsection (8) below.

(8)The days mentioned in subsection (7) above are—

(a)the 15th day of the month following that in which the removal in question takes place; and

(b)the day of the issue, in respect of the supply, of a VAT invoice or of an invoice of such other description as the Commissioners may by regulations prescribe.

(9)Where a taxable person provides a document to himself which—

(a)purports to be a VAT invoice in respect of a supply of goods or services to him by another taxable person; and

(b)is in accordance with regulations under paragraph 2 of Schedule 11 treated as the VAT invoice required by the regulations to be provided by the supplier,

subsections (5) and (6) above shall have effect in relation to that supply as if—

(i)the provision of the document to himself by the first-mentioned taxable person were the issue by the supplier of a VAT invoice in respect of the supply; and

(ii)any notice of election given or request made by the first-mentioned taxable person for the purposes of those provisions had been given or made by the supplier.

(10)The Commissioners may, at the request of a taxable person, by direction alter the time at which supplies made by him (or such supplies made by him as may be specified in the direction) are to be treated as taking place, either—

(a)by directing those supplies to be treated as taking place—

(i)at times or on dates determined by or by reference to the occurrence of some event described in the direction; or

(ii)at times or on dates determined by or by reference to the time when some event so described would in the ordinary course of events occur,

the resulting times or dates being in every case earlier than would otherwise apply; or

(b)by directing that, notwithstanding subsections (5) and (6) above, those supplies shall (to the extent that they are not treated as taking place at the time mentioned in subsection (4) above) be treated as taking place—

(i)at the beginning of the relevant working period (as defined in his case in and for the purposes of the direction); or

(ii)at the end of the relevant working period (as so defined).

(11)Where goods are treated as supplied by an order under section 5(5), the supply is treated as taking place when they are appropriated to the use mentioned in that section.

(12)Where there is a supply of goods by virtue only of paragraph 5(1) of Schedule 4, the supply is treated as taking place when the goods are transferred or disposed of as mentioned in that paragraph.

(13)Where there is a supply of services by virtue only of paragraph 5(4) of Schedule 4, the supply is treated as taking place when the goods are appropriated to the use mentioned in that paragraph.

(14)The Commissioners may by regulations make provision with respect to the time at which (notwithstanding subsections (2) to (8) and (11) to (13) above or section 55(4)) a supply is to be treated as taking place in cases where—

(a)it is a supply of goods or services for a consideration the whole or part of which is determined or payable periodically, or from time to time, or at the end of any period, or

(b)it is a supply of goods for a consideration the whole or part of which is determined at the time when the goods are appropriated for any purpose, or

(c)there is a supply to which section 55 applies, or

(d)there is a supply of services by virtue of paragraph 5(4) of Schedule 4 or an order under section 5(4);

and for any such case as is mentioned in this subsection the regulations may provide for goods or services to be treated as separately and successively supplied at prescribed times or intervals.

(15)In this Act“VAT invoice” means such an invoice as is required under paragraph 2(1) of Schedule 11, or would be so required if the person to whom the supply is made were a person to whom such an invoice should be issued.

7Place of supply

(1)This section shall apply (subject to sections 14 and 18) for determining, for the purposes of this Act, whether goods or services are supplied in the United Kingdom.

(2)Subject to the following provisions of this section, if the supply of any goods does not involve their removal from or to the United Kingdom they shall be treated as supplied in the United Kingdom if they are in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom.

(3)Goods shall be treated—

(a)as supplied in the United Kingdom where their supply involves their installation or assembly at a place in the United Kingdom to which they are removed; and

(b)as supplied outside the United Kingdom where their supply involves their installation or assembly at a place outside the United Kingdom to which they are removed.

(4)Goods whose place of supply is not determined under any of the preceding provisions of this section shall be treated as supplied in the United Kingdom where—

(a)the supply involves the removal of the goods to the United Kingdom by or under the directions of the person who supplies them;

(b)the supply is a transaction in pursuance of which the goods are acquired in the United Kingdom from another member State by a person who is not a taxable person;

(c)the supplier—

(i)is liable to be registered under Schedule 2; or

(ii)would be so liable if he were not already registered under this Act or liable to be registered under Schedule 1; and

(d)the supply is neither a supply of goods consisting in a new means of transport nor anything which is treated as a supply for the purposes of this Act by virtue only of paragraph 5(1) or 6 of Schedule 4.

(5)Goods whose place of supply is not determined under any of the preceding provisions of this section and which do not consist in a new means of transport shall be treated as supplied outside the United Kingdom where—

(a)the supply involves the removal of the goods, by or under the directions of the person who supplies them, to another member State;

(b)the person who makes the supply is taxable in another member State; and

(c)provisions of the law of that member State corresponding, in relation to that member State, to the provisions made by subsection (4) above make that person liable to VAT on the supply;

but this subsection shall not apply in relation to any supply in a case where the liability mentioned in paragraph (c) above depends on the exercise by any person of an option in the United Kingdom corresponding to such an option as is mentioned in paragraph 1(2) of Schedule 2 unless that person has given, and has not withdrawn, a notification to the Commissioners that he wishes his supplies to be treated as taking place outside the United Kingdom where they are supplies in relation to which the other requirements of this subsection are satisfied.

(6)Goods whose place of supply is not determined under any of the preceding provisions of this section shall be treated as supplied in the United Kingdom where—

(a)their supply involves their being imported from a place outside the member States; and

(b)the person who supplies them is the person by whom, or under whose directions, they are so imported.

(7)Goods whose place of supply is not determined under any of the preceding provisions of this section but whose supply involves their removal to or from the United Kingdom shall be treated—

(a)as supplied in the United Kingdom where their supply involves their removal from the United Kingdom without also involving their previous removal to the United Kingdom; and

(b)as supplied outside the United Kingdom in any other case.

(8)For the purposes of the preceding provisions of this section, where goods, in the course of their removal from a place in the United Kingdom to another place in the United Kingdom, leave and re-enter the United Kingdom the removal shall not be treated as a removal from or to the United Kingdom.

(9)The Commissioners may by regulations provide that a notification for the purposes of subsection (5) above is not to be given or withdrawn except in such circumstances, and in such form and manner, as may be prescribed.

(10)A supply of services shall be treated as made—

(a)in the United Kingdom if the supplier belongs in the United Kingdom; and

(b)in another country (and not in the United Kingdom) if the supplier belongs in that other country.

(11)The Treasury may by order provide, in relation to goods or services generally or to particular goods or services specified in the order, for varying the rules for determining where a supply of goods or services is made.

8Reverse charge on supplies received from abroad

(1)Subject to subsection (3) below, where relevant services are—

(a)supplied by a person who belongs in a country other than the United Kingdom, and

(b)received by a person (“the recipient”) who belongs in the United Kingdom for the purposes of any business carried on by him,

then all the same consequences shall follow under this Act (and particularly so much as charges VAT on a supply and entitles a taxable person to credit for input tax) as if the recipient had himself supplied the services in the United Kingdom in the course or furtherance of his business, and that supply were a taxable supply.

(2)In this section“relevant services” means services of any of the descriptions specified in Schedule 5, not being services within any of the descriptions specified in Schedule 9.

(3)Supplies which are treated as made by the recipient under subsection (1) above are not to be taken into account as supplies made by him when determining any allowance of input tax in his case under section 26(1).

(4)In applying subsection (1) above, the supply of services treated as made by the recipient shall be assumed to have been made at a time to be determined in accordance with regulations prescribing rules for attributing a time of supply in cases within that subsection.

(5)The Treasury may by order add to, or vary, Schedule 5.

(6)The power of the Treasury by order to add to or vary Schedule 5 shall include power, where any services whose place of supply is determined by an order under section 7(11) are added to that Schedule, to provide that subsection (1) above shall have effect in relation to those services as if a person belongs in the United Kingdom for the purposes of paragraph (b) of that subsection if, and only if, he is a taxable person.

9Place where supplier or recipient of services belongs

(1)Subsection (2) below shall apply for determining, in relation to any supply of services, whether the supplier belongs in one country or another and subsections (3) and (4) below shall apply (subject to any provision made under section 8(6)) for determining, in relation to any supply of services, whether the recipient belongs in one country or another.

(2)The supplier of services shall be treated as belonging in a country if—

(a)he has there a business establishment or some other fixed establishment and no such establishment elsewhere; or

(b)he has no such establishment (there or elsewhere) but his usual place of residence is there; or

(c)he has such establishments both in that country and elsewhere and the establishment of his which is most directly concerned with the supply is there.

(3)If the supply of services is made to an individual and received by him otherwise than for the purposes of any business carried on by him, he shall be treated as belonging in whatever country he has his usual place of residence.

(4)Where subsection (3) above does not apply, the person to whom the supply is made shall be treated as belonging in a country if—

(a)either of the conditions mentioned in paragraphs (a) and (b) of subsection (2) above is satisfied; or

(b)he has such establishments as are mentioned in subsection (2) above both in that country and elsewhere and the establishment of his at which, or for the purposes of which, the services are most directly used or to be used is in that country.

(5)For the purposes of this section (but not for any other purposes)—

(a)a person carrying on a business though a branch or agency in any country shall be treated as having a business establishment there; and

(b)“usual place of residence”, in relation to a body corporate, means the place where it is legally constituted.

Acquisition of goods from member States

10Scope of VAT on acquisitions from member States

(1)VAT shall be charged on any acquisition from another member State of any goods where—

(a)the acquisition is a taxable acquisition and takes place in the United Kingdom;

(b)the acquisition is otherwise than in pursuance of a taxable supply; and

(c)the person who makes the acquisition is a taxable person or the goods are subject to a duty of excise or consist in a new means of transport.

(2)An acquisition of goods from another member State is a taxable acquisition if—

(a)it falls within subsection (3) below or the goods consist in a new means of transport; and

(b)it is not an exempt acquisition.

(3)An acquisition of goods from another member State falls within this subsection if—

(a)the goods are acquired in the course or furtherance of—

(i)any business carried on by any person; or

(ii)any activities carried on otherwise than by way of business by any body corporate or by any club, association, organisation or other unincorporated body;

(b)it is the person who carries on that business or, as the case may be, those activities who acquires the goods; and

(c)the supplier—

(i)is taxable in another member State at the time of the transaction in pursuance of which the goods are acquired; and

(ii)in participating in that transaction, acts in the course or furtherance of a business carried on by him.

11Meaning of acquisition of goods from another member State

(1)Subject to the following provisions of this section, references in this Act to the acquisition of goods from another member State shall be construed as references to any acquisition of goods in pursuance of a transaction in relation to which the following conditions are satisfied, that is to say—

(a)the transaction is a supply of goods (including anything treated for the purposes of this Act as a supply of goods); and

(b)the transaction involves the removal of the goods from another member State;

and references in this Act, in relation to such an acquisition, to the supplier shall be construed accordingly.

(2)It shall be immaterial for the purposes of subsection (1) above whether the removal of the goods from the other member State is by or under the directions of the supplier or by or under the directions of the person who acquires them or any other person.

(3)Where the person with the property in any goods does not change in consequence of anything which is treated for the purposes of this Act as a supply of goods, that supply shall be treated for the purposes of this Act as a transaction in pursuance of which there is an acquisition of goods by the person making it.

(4)The Treasury may by order provide with respect to any description of transaction that the acquisition of goods in pursuance of a transaction of that description is not to be treated for the purposes of this Act as the acquisition of goods from another member State.

12Time of acquisition

(1)Subject to section 18 and any regulations under subsection (3) below, where goods are acquired from another member State, the acquisition shall be treated for the purposes of this Act as taking place on whichever is the earlier of—

(a)the 15th day of the month following that in which the event occurs which, in relation to that acquisition, is the first relevant event for the purposes of taxing the acquisition; and

(b)the day of the issue, in respect of the transaction in pursuance of which the goods are acquired, of an invoice of such a description as the Commissioners may by regulations prescribe.

(2)For the purposes of this Act the event which, in relation to any acquisition of goods from another member State, is the first relevant event for the purposes of taxing the acquisition is the first removal of the goods which is involved in the transaction in pursuance of which they are acquired.

(3)The Commissioners may by regulations make provision with respect to the time at which an acquisition is to be treated as taking place in prescribed cases where the whole or part of any consideration comprised in the transaction in pursuance of which the goods are acquired is determined or payable periodically, or from time to time, or at the end of a period; and any such regulations may provide, in relation to any case to which they apply, for goods to be treated as separately and successively acquired at prescribed times or intervals.

13Place of acquisition

(1)This section shall apply (subject to section 18) for determining for the purposes of this Act whether goods acquired from another member State are acquired in the United Kingdom.

(2)The goods shall be treated as acquired in the United Kingdom if they are acquired in pursuance of a transaction which involves their removal to the United Kingdom and does not involve their removal from the United Kingdom, and (subject to the following provisions of this section) shall otherwise be treated as acquired outside the United Kingdom.

(3)Subject to subsection (4) below, the goods shall be treated as acquired in the United Kingdom if they are acquired by a person who, for the purposes of their acquisition, makes use of a number assigned to him for the purposes of VAT in the United Kingdom.

(4)Subsection (3) above shall not require any goods to be treated as acquired in the United Kingdom where it is established, in accordance with regulations made by the Commissioners for the purposes of this section that VAT—

(a)has been paid in another member State on the acquisition of those goods; and

(b)fell to be paid by virtue of provisions of the law of that member State corresponding, in relation to that member State, to the provision made by subsection (2) above.

(5)The Commissioners may by regulations make provision for the purposes of this section—

(a)for the circumstances in which a person is to be treated as having been assigned a number for the purposes of VAT in the United Kingdom;

(b)for the circumstances in which a person is to be treated as having made use of such a number for the purposes of the acquisition of any goods; and

(c)for the refund, in prescribed circumstances, of VAT paid in the United Kingdom on acquisitions of goods in relation to which the conditions specified in subsection (4)(a) and (b) above are satisfied.

14Acquisitions from persons belonging in other member States

(1)Subject to subsection (3) below, where—

(a)a person (“the original supplier”) makes a supply of goods to a person who belongs in another member State (“the intermediate supplier”);

(b)that supply involves the removal of the goods from another member State and their removal to the United Kingdom but does not involve the removal of the goods from the United Kingdom;

(c)both that supply and the removal of the goods to the United Kingdom are for the purposes of the making of a supply by the intermediate supplier to another person (“the customer”) who is registered under this Act;

(d)neither of those supplies involves the removal of the goods from a member State in which the intermediate supplier is taxable at the time of the removal without also involving the previous removal of the goods to that member State; and

(e)there would be a taxable acquisition by the customer if the supply to him involved the removal of goods from another member State to the United Kingdom,

the supply by the original supplier to the intermediate supplier shall be disregarded for the purposes of this Act and the supply by the intermediate supplier to the customer shall be treated for the purposes of this Act, other than Schedule 3, as if it did involve the removal of the goods from another member State to the United Kingdom.

(2)Subject to subsection (3) below, where—

(a)a person belonging in another member State makes such a supply of goods to a person who is registered under this Act as involves their installation or assembly at a place in the United Kingdom to which they are removed; and

(b)there would be a taxable acquisition by the registered person if that supply were treated as not being a taxable supply but as involving the removal of the goods from another member State to the United Kingdom,

that supply shall be so treated except for the purposes of Schedule 3.

(3)Neither subsection (1) nor subsection (2) above shall apply in relation to any supply unless the intermediate supplier or, as the case may be, the person making the supply complies with such requirements as to the furnishing (whether before or after the supply is made) of invoices and other documents, and of information, to—

(a)the Commissioners, and

(b)the person supplied,

as the Commissioners may by regulations prescribe; and regulations under this subsection may provide for the times at which, and the form and manner in which, any document or information is to be furnished and for the particulars which it is to contain.

(4)Where this section has the effect of treating a taxable acquisition as having been made, section 12(1) shall apply in relation to that acquisition with the omission of the words from “whichever” to “acquisition; and” at the end of paragraph (a).

(5)For the purposes of this section a person belongs in another member State if—

(a)he does not have any business establishment or other fixed establishment in the United Kingdom and does not have his usual place of residence in the United Kingdom;

(b)he is neither registered under this Act nor required to be so registered;

(c)he does not have a VAT representative and is not for the time being required to appoint one; and

(d)he is taxable in another member State;

but, in determining for the purposes of paragraph (b) above whether a person is required to be registered under this Act, there shall be disregarded any supplies which, if he did belong in another member State and complied with the requirements prescribed under subsection (3) above, would fall to be disregarded by virtue of this section.

(6)Without prejudice to section 13(4), where—

(a)any goods are acquired from another member State in a case which corresponds, in relation to another member State, to the case specified in relation to the United Kingdom in subsection (1) above; and

(b)the person who acquires the goods is registered under this Act and would be the intermediate supplier in relation to that corresponding case,

the supply to him of those goods and the supply by him of those goods to the person who would be the customer in that corresponding case shall both be disregarded for the purposes of this Act, other than the purposes of the information provisions referred to in section 92(7).

(7)References in this section to a person being taxable in another member State shall not include references to a person who is so taxable by virtue only of provisions of the law of another member State corresponding to the provisions of this Act by virtue of which a person who is not registered under this Act is a taxable person if he is required to be so registered.

(8)This section does not apply in relation to any supply of goods by an intermediate supplier to whom the goods were supplied before 1st August 1993.

Importation of goods from outside the member States

15General provisions relating to imported goods

(1)For the purposes of this Act goods are imported from a place outside the member States where—

(a)having been removed from a place outside the member States, they enter the territory of the Community;

(b)they enter that territory by being removed to the United Kingdom or are removed to the United Kingdom after entering that territory; and

(c)the circumstances are such that it is on their removal to the United Kingdom or subsequently while they are in the United Kingdom that any Community customs debt in respect of duty on their entry into the territory of the Community would be incurred.

(2)Accordingly—

(a)goods shall not be treated for the purposes of this Act as imported at any time before a Community customs debt in respect of duty on their entry into the territory of the Community would be incurred, and

(b)the person who is to be treated for the purposes of this Act as importing any goods from a place outside the member States is the person who would be liable to discharge any such Community customs debt.

(3)Subsections (1) and (2) above shall not apply, except in so far as the context otherwise requires or provision to the contrary is contained in regulations under section 16(1), for construing any references to importation or to an importer in any enactment or subordinate legislation applied for the purposes of this Act by section 16(1).

16Application of customs enactments

(1)Subject to such exceptions and adaptations as the Commissioners may by regulations prescribe and except where the contrary intention appears—

(a)the provision made by or under the Customs and Excise Acts 1979 and the other enactments and subordinate legislation for the time being having effect generally in relation to duties of customs and excise charged on the importation of goods into the United Kingdom; and

(b)the Community legislation for the time being having effect in relation to Community customs duties charged on goods entering the territory of the Community,

shall apply (so far as relevant) in relation to any VAT chargeable on the importation of goods from places outside the member States as they apply in relation to any such duty of customs or excise or, as the case may be, Community customs duties.

(2)Regulations under section 16 of the [1953 c. 36.] Post Office Act 1953 (which provides for the application of customs enactments to postal packets) may make special provision in relation to VAT.

17Free zone regulations

(1)This section applies in relation to VAT chargeable on the importation of goods from places outside the member States; and in this section“free zone” has the meaning given by section 100A(2) of the Management Act.

(2)Subject to any contrary provision made by any directly applicable Community provision, goods which are chargeable with VAT may be moved into a free zone and may remain as free zone goods without payment of VAT.

(3)The Commissioners may by regulations (“free zone regulations”) make provision with respect to the movement of goods into, and the removal of goods from, any free zone and the keeping, securing and treatment of goods which are within a free zone, and subject to any provision of the regulations,“free zone goods” means goods which are within a free zone.

(4)Without prejudice to the generality of subsection (3), free zone regulations may make provision—

(a)for enabling the Commissioners to allow goods to be removed from a free zone without payment of VAT in such circumstances and subject to such conditions as they may determine;

(b)for determining where any VAT becomes payable in respect of goods which cease to be free zone goods—

(i)the rates of any VAT applicable; and

(ii)the time at which those goods cease to be free zone goods;

(c)for determining for the purpose of enabling VAT to be charged in respect of free zone goods in a case where a person wishes to pay that VAT notwithstanding that the goods will continue to be free zone goods, the rate of VAT to be applied; and

(d)permitting free zone goods to be destroyed without payment of VAT in such circumstances and subject to such conditions as the Commissioners may determine.

(5)The Commissioners, with respect to free zone goods or the movement of goods into any free zone, may by regulations make provision—

(a)for relief from the whole or part of any VAT chargeable on the importation of goods into the United Kingdom in such circumstances as they may determine;

(b)in place of, or in addition to, any provision made by section 6 or any other enactment, for determining the time when a supply of goods which are or have been free zone goods is to be treated as taking place for the purposes of the charge to VAT; and

(c)as to the treatment, for the purposes of VAT, of goods which are manufactured or produced within a free zone from other goods or which have other goods incorporated in them while they are free zone goods.

Goods subject to a warehousing regime

18Place and time of acquisition or supply

(1)Where—

(a)any goods have been removed from a place outside the member States and have entered the territory of the Community;

(b)the material time for any acquisition of those goods from another member State or for any supply of those goods is while they are subject to a warehousing regime and before the duty point; and

(c)those goods are not mixed with any dutiable goods which were produced or manufactured in the United Kingdom or acquired from another member State,

then the acquisition or supply mentioned in paragraph (b) above shall be treated for the purposes of this Act as taking place outside the United Kingdom.

(2)Subsection (3) below applies where—

(a)any dutiable goods are acquired from another member State; or

(b)any person makes a supply of—

(i)any dutiable goods which were produced or manufactured in the United Kingdom or acquired from another member State; or

(ii)any goods comprising a mixture of goods falling within sub-paragraph (i) above and other goods.

(3)Where this subsection applies and the material time for the acquisition or supply mentioned in subsection (2) above is while the goods in question are subject to a warehousing regime and before the duty point, that acquisition or supply shall be treated for the purposes of this Act as taking place outside the United Kingdom if the material time for any subsequent supply of those goods is also while the goods are subject to the warehousing regime and before the duty point.

(4)Where the material time for any acquisition or supply of any goods in relation to which subsection (3) above applies is while the goods are subject to a warehousing regime and before the duty point but the acquisition or supply nevertheless falls, for the purposes of this Act, to be treated as taking place in the United Kingdom—

(a)that acquisition or supply shall be treated for the purposes of this Act as taking place at the earlier of the following times, that is to say, the time when the goods are removed from the warehousing regime and the duty point; and

(b)in the case of a supply, any VAT payable on the supply shall be paid (subject to any regulations under subsection (5) below)—

(i)at the time when the supply is treated as taking place under paragraph (a) above; and

(ii)by the person by whom the goods are so removed or, as the case may be, together with the duty or agricultural levy, by the person who is required to pay the duty or levy.

(5)The Commissioners may by regulations make provision—

(a)for enabling goods to be removed from a warehousing regime by a taxable person without payment of VAT chargeable in respect of those goods by virtue of subsection (4)(a) above; and

(b)for that VAT to be accounted for together with the VAT chargeable on supplies of goods and services by that person.

(6)In this section—

  • “dutiable goods” means any goods which are subject—

    (a)

    to a duty of excise; or

    (b)

    in accordance with any provision for the time being having effect for transitional purposes in connection with the accession of any State to the European Communities, to any Community customs duty or agricultural levy of the European Community;

  • “the duty point”, in relation to any goods, means—

    (a)

    in the case of goods which are subject to a duty of excise, the time when the requirement to pay the duty on those goods takes effect; and

    (b)

    in the case of goods which are not so subject, the time when any Community customs debt in respect of duty on the entry of the goods into the territory of the Community would be incurred or, as the case may be, the corresponding time in relation to any such duty or levy as is mentioned in paragraph (b) of the definition of dutiable goods;

  • “material time”—

    (a)

    in relation to any acquisition or supply the time of which is determined in accordance with regulations under section 6(14) or 12(3), means such time as may be prescribed for the purpose of this section by those regulations;

    (b)

    in relation to any other acquisition, means the time of the event which, in relation to the acquisition, is the first relevant event for the purposes of taxing it; and

    (c)

    in relation to any other supply, means the time when the supply would be treated as taking place in accordance with subsection (2) of section 6 if paragraph (c) of that subsection were omitted;

  • “warehouse” means any warehouse where goods may be stored in any member State without payment of any one or more of the following, that is to say—

    (a)

    Community customs duty;

    (b)

    any agricultural levy of the European Community;

    (c)

    VAT on the importation of the goods into any member State;

    (d)

    any duty of excise or any duty which is equivalent in another member State to a duty of excise.

(7)References in this section to goods being subject to a warehousing regime is a reference to goods being kept in a warehouse or being transported between warehouses (whether in the same or different member States) without the payment in a member State of any duty, levy or VAT; and references to the removal of goods from a warehousing regime shall be construed accordingly.

Determination of value

19Value of supply of goods or services

(1)For the purposes of this Act the value of any supply of goods or services shall, except as otherwise provided by or under this Act, be determined in accordance with this section and Schedule 6, and for those purposes subsections (2) to (4) below have effect subject to that Schedule.

(2)If the supply is for a consideration in money its value shall be taken to be such amount as, with the addition of the VAT chargeable, is equal to the consideration.

(3)If the supply is for a consideration not consisting or not wholly consisting of money, its value shall be taken to be such amount in money as, with the addition of the VAT chargeable, is equivalent to the consideration.

(4)Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply shall be deemed to be for such part of the consideration as is properly attributable to it.

(5)For the purposes of this Act the open market value of a supply of goods or services shall be taken to be the amount that would fall to be taken as its value under subsection (2) above if the supply were for such consideration in money as would be payable by a person standing in no such relationship with any person as would affect that consideration.

20Valuation of acquisitions from other member States

(1)For the purposes of this Act the value of any acquisition of goods from another member State shall be taken to be the value of the transaction in pursuance of which they are acquired.

(2)Where goods are acquired from another member State otherwise than in pursuance of a taxable supply, the value of the transaction in pursuance of which they are acquired shall be determined for the purposes of subsection (1) above in accordance with this section and Schedule 7, and for those purposes—

(a)subsections (3) to (5) below have effect subject to that Schedule; and

(b)section 19 and Schedule 6 shall not apply in relation to the transaction.

(3)If the transaction is for a consideration in money, its value shall be taken to be such amount as is equal to the consideration.

(4)If the transaction is for a consideration not consisting or not wholly consisting of money, its value shall be taken to be such amount in money as is equivalent to the consideration.

(5)Where a transaction in pursuance of which goods are acquired from another member State is not the only matter to which a consideration in money relates, the transaction shall be deemed to be for such part of the consideration as is properly attributable to it.

21Value of imported goods

(1)For the purposes of this Act, the value of goods imported from a place outside the member States shall (subject to subsections (2) and (3) below) be determined according to the rules applicable in the case of Community customs duties, whether or not the goods in question are subject to any such duties.

(2)For the purposes of this Act the value of any goods imported from a place outside the member States shall be taken to include the following so far as they are not already included in that value in accordance with the rules mentioned in subsection (1) above, that is to say—

(a)all taxes, duties and other charges levied either outside or, by reason of importation, within the United Kingdom (except VAT); and

(b)all costs by way of commission, packing, transport and insurance up to the port or place of importation.

(3)Subject to subsection (2) above, where—

(a)goods are imported from a place outside the member States for a consideration which is or includes a price in money payable as on the transfer of property;

(b)the terms on which those goods are so imported allow a discount for prompt payment of that price;

(c)those terms do not include provision for payment of that price by instalments; and

(d)payment of that price is made in accordance with those terms so that the discount falls to be allowed,

the value of the goods shall be taken for the purposes of this Act to be reduced by the amount of the discount.

22Value of certain goods

(1)Where a person makes a supply on which VAT is chargeable by applying, or causing to be applied, any treatment or process to another person’s goods, then if the goods—

(a)are not goods to which subsection (3) below applies, but

(b)become as a result of the treatment or process goods to which that subsection applies,

the amount of the VAT chargeable shall, subject to the following provisions of this section, be determined as if the supply had been a sale for full consideration of the goods resulting from the treatment or process.

(2)Subsection (1) above does not apply where the person to whom the supply is made—

(a)is registered under this Act; and

(b)gives to the person making the supply a certificate, in such form and containing such particulars as the Commissioners may by regulations prescribe, that the supply is for the purpose of a business carried on or to be carried on by him.

(3)This subsection applies to aircraft of a weight of 8,000 kilogrammes or more, and hovercraft, if (in each case) they have been adapted, but were not designed, for use for recreation or pleasure.

(4)The Treasury may by order vary subsection (3) above by adding to or deleting from it any description of goods or by varying any description of goods for the time being specified in it.

(5)The Treasury may by order make provision for securing a reduction of the VAT chargeable on supplies to which subsection (1) above applies in cases where—

(a)VAT was previously chargeable on a supply or importation of the goods to which the treatment or process is applied; and

(b)such other conditions are satisfied as may be specified in the order or as may be imposed by the Commissioners in pursuance of the order.

(6)A person who applies or causes to be applied a treatment or process to another person’s goods shall, if the goods satisfy the conditions of paragraphs (a) and (b) of subsection (1) above be treated for the purposes of paragraph 2 of Schedule 4, as producing the resulting goods by applying the treatment or process, whether or not he would otherwise fall to be so treated.

23Gaming machines

(1)Where a person plays a game of chance by means of a gaming machine, then for the purposes of VAT (but without prejudice to subsection (2) below) the amount paid by him to play shall be treated as the consideration for a supply of services to him.

(2)The value to be taken as the value of supplies made in the circumstances mentioned in subsection (1) above in any period shall be determined as if the consideration for the supplies were reduced by an amount equal to the amount (if any) received in that period by persons (other than the person making the supply and persons acting on his behalf) playing successfully.

(3)The insertion of a token into a machine shall be treated for the purposes of subsection (1) above as the payment of an amount equal to that for which the token can be obtained; and the receipt of a token by a person playing successfully shall be treated for the purposes of subsection (2) above—

(a)if the token is of a kind used to play the machine, as the receipt of an amount equal to that for which such a token can be obtained;

(b)if the token is not of such a kind but can be exchanged for money, as the receipt of an amount equal to that for which it can be exchanged.

(4)In this section—

  • “game of chance” has the same meaning as in the [1968 c. 65.] Gaming Act 1968; and

  • “gaming machine” means a machine in respect of which the following conditions are satisfied, namely—

    (a)

    it is constructed or adapted for playing a game of chance by means of it; and

    (b)

    a player pays to play the machine (except where he has an opportunity to play payment-free as the result of having previously played successfully), either by inserting a coin or token into the machine or in some other way; and

    (c)

    the element of chance in the game is provided by means of the machine.

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.

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