Election to waive exemption
2(1)Subject to sub-paragraphs (2) and (3) and paragraph 3 below, where an election under this paragraph has effect in relation to any land, if and to the extent that any grant made in relation to it at a time when the election has effect by the person who made the election, or where that person is a body corporate by that person or a relevant associate, would (apart from this sub-paragraph) fall within Group 1 of Schedule 9, the grant shall not fall within that Group.
(2)Sub-paragraph (1) above shall not apply in relation to a grant if the grant is made in relation to—
(a)a building or part of a building intended for use as a dwelling or number of dwellings or solely for a relevant residential purpose; or
(b)a building or part of a building intended for use solely for a relevant charitable purpose, other than as an office.
(3)Sub-paragraph (1) above shall not apply in relation to a grant if—
(a)the grant is made to a registered housing association and the association has given to the grantor a certificate stating that the land is to be used (after any necessary demolition work) for the construction of a building or buildings intended for use as a dwelling or number of dwellings or solely for a relevant residential purpose; or
(b)the grant is made to an individual and the land is to be used for the construction, otherwise than in the course or furtherance of a business carried on by him, of a building intended for use by him as a dwelling.
(4)Subject to the following provisions of this paragraph, no input tax on any supply or importation which, apart from this sub-paragraph, would be allowable by virtue of the operation of this paragraph shall be allowed if the supply or importation took place before the first day for which the election in question has effect.
(5)Subject to sub-paragraph (6) below, sub-paragraph (4) above shall not apply where the person by whom the election was made—
(a)has not, before the first day for which the election has effect, made in relation to the land in relation to which the election has effect any grant falling within Group 1 of Schedule 9; or
(b)has before that day made in relation to that land a grant or grants so falling but the grant, or all the grants—
(i)were made in the period beginning with 1st April 1989 and ending with 31st July 1989; and
(ii)would have been taxable supplies but for the amendments made by Schedule 3 to the [1989 c. 26.] Finance Act 1989.
(6)Sub-paragraph (5) above does not make allowable any input tax on supplies or importations taking place before 1st August 1989 unless—
(a)it is attributable by or under regulations to grants made by the person on or after 1st April 1989 which would have been taxable supplies but for the amendments made by Schedule 3 to the Finance Act 1989, and
(b)the election has effect from 1st August 1989.
(7)Sub-paragraph (4) above shall not apply in relation to input tax on grants or other supplies which are made in the period beginning with 1st April 1989 and ending with 31st July 1989—
(a)they would have been zero-rated by virtue of item 1 or 2 of Group 5 of Schedule 8 or exempt by virtue of item 1 of Group 1 of Schedule 9 but for the amendments made by Schedule 3 to the Finance Act 1989; and
(b)the election has effect from 1st August 1989.
(8)Sub-paragraph (4) above shall not apply in relation to any election having effect from any day on or after 1st January 1992, except in respect of the input tax on a supply or importation which took place before 1st August 1989.
(9)Where a person has made an exempt grant in relation to any land and has made an election in relation to that land which has effect from any day before 1st January 1992, he may apply to the Commissioners for sub-paragraph (4) above to be disapplied in respect of any input tax on a supply or importation which took place on or after 1st August 1989, but the Commissioners shall only permit the disapplication of that sub-paragraph if they are satisfied, having regard to all the circumstances of the case, and in particular to—
(a)the total value of—
(i)exempt grants made;
(ii)taxable grants made or expected to be made, in relation to the land; and
(b)the total amount of input tax in relation to the land which had been incurred before the day from which the election had effect,
that a fair and reasonable attribution of the input tax mentioned in paragraph (b) above will be secured.
3(1)An election under paragraph 2 above shall have effect—
(a)subject to the following provisions of this paragraph, from the beginning of the day on which the election is made or of any later day specified in the election; or
(b)where the election was made before 1st November 1989, from the beginning of 1st August 1989 or of any later day so specified.
(2)An election under paragraph 2 above shall have effect in relation to any land specified, or of a description specified, in the election.
(3)Where such an election is made in relation to, or to part of, a building (or planned building), it shall have effect in relation to the whole of the building and all the land within its curtilage and for the purposes of this sub-paragraph buildings linked internally or by a covered walkway, and parades, precincts and complexes divided into separate units, shall be taken to be a single building (if they otherwise would not be).
(4)Where such an election is made in relation to agricultural land (including a building on agricultural land), it shall have effect in relation to any other agricultural land if that other land is not separated from it by—
(a)land which is not agricultural land; or
(b)agricultural land in separate ownership.
(5)For the purposes of sub-paragraph (4) above—
(a)land shall be taken not to be separated from other land if it is separated from it only by a road, railway, river or something similar; and
(b)land is in separate ownership from land in relation to which an election is made if the person by whom the election is made had no interest in, right over or licence to occupy it and, where that person is a body corporate, no relevant associate has any such interest, right or licence.
(6)An election under paragraph 2 above shall be irrevocable and, except where it is an election of a description specified in a notice published by the Commissioners, shall not have effect unless—
(a)in a case to which sub-paragraph (9) below applies, the Commissioners have given the permission required under that sub-paragraph;
(b)in any other case, written notification of the election is given to the Commissioners not later than the end of the period of 30 days beginning with the day on which the election is made, or not later than the end of such longer period beginning with that day as the Commissioners may in any particular case allow, together with such information as the Commissioners may require.
(7)In paragraph 2 above and this paragraph “relevant associate”, in relation to a body corporate by which an election under paragraph 2 above has been made in relation to any building or land, means a body corporate which under section 43—
(a)was treated as a member of the same group as the body corporate by which the election was made at the time when the election first had effect;
(b)has been so treated at any later time when the body corporate by which the election was made had an interest in, right over or licence to occupy the building or land (or any part of it); or
(c)has been treated as a member of the same group as a body corporate within paragraph (a) or (b) above or this paragraph at a time when that body corporate had an interest in, right over or licence to occupy the building or land (or any part of it).
(8)In paragraph 2 above “registered housing association” means a registered housing association within the meaning of the [1985 c. 69.] Housing Associations Act 1985 or Part VII of the [S.I.1981/156 (N.I.3).] Housing (Northern Ireland) Order 1981.
(9)Where a person who wishes to make an election in relation to any land (the relevant land) to have effect on or after 1st January 1992, has made, makes or intends to make, an exempt grant in relation to the relevant land at any time between 1st August 1989 and before the beginning of the day from which he wishes an election in relation to the relevant land to have effect, he shall not make an election in relation to the relevant land unless he obtains the prior written permission of the Commissioners, who shall only give such permission if they are satisfied having regard to all the circumstances of the case and in particular to—
(a)the total value of exempt grants in relation to the relevant land made or to be made before the day from which the person wishes his election to have effect;
(b)the expected total value of grants relating to the relevant land that would be taxable if the election were to have effect; and
(c)the total amount of input tax which has been incurred on or after 1st August 1989 or is likely to be incurred in relation to the relevant land,
that there would be secured a fair and reasonable attribution of the input tax mentioned in paragraph (c) above to grants in relation to the relevant land which, if the election were to have effect, would be taxable.
4(1)This paragraph has effect where rent is payable in consideration of the grant of an interest in, right over, or licence to occupy any building or land to which an election under paragraph 2 above relates (or any part of any such building or land).
(2)If—
(a)the rent relates to a period beginning before and ending on or after the first day for which the election has effect; and
(b)the grant for which the rent is consideration would, apart from this sub-paragraph, take place before that day,
the grant shall be treated as taking place on that day to the extent that it is made for rent relating to the part of the period falling on or after that day.
(3)If—
(a)the rent relates to a period beginning on or after the first day for which the election has effect; and
(b)the grant for which the rent is consideration would, apart from this sub-paragraph, take place before that day,
the grant shall be treated as taking place on the first day of the period to which the rent relates.
(4)If—
(a)the rent relates to a period beginning before the first day for which the election has effect; and
(b)the grant for which the rent is consideration takes place on or after that day,
VAT shall not be chargeable on the grant by virtue of paragraph 2 above to the extent that it is made for rent relating to any time before that day.
(5)Where the rent is payable by a person in relation to a period when he is in occupation of a building completed before 1st August 1989 (or part of such a building) or land of which he was in occupation immediately before that date, any VAT which would be chargeable by virtue of paragraph 2 above on the grant for which the rent is consideration—
(a)except in the case of a charity, shall be chargeable as if the consideration were reduced by 50 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1989 and ending on 31st July 1990; and
(b)in the case of a charity—
(i)shall be chargeable as if the consideration were reduced by 80 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1989 and ending on 31st July 1990;
(ii)shall be chargeable as if the consideration were reduced by 60 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1990 and ending on 31st July 1991;
(iii)shall be chargeable as if the consideration were reduced by 40 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1991 and ending on 31st July 1992; and
(iv)shall be chargeable as if the consideration were reduced by 20 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1992 and ending on 31st July 1993.