Finance Act 1972

Part I

Imposition and extent of tax

Value added tax

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• (1) A tax, to be known as value added tax, shall be charged in accordance with the provisions of this Part of this Act on the supply of goods and services in the United Kingdom (including anything treated as such a supply) and on the importation of goods into the United Kingdom.

• (2) The tax shall be under the care and management of the Commissioners.

• (3) All money and securities for money collected or received for or on account of the tax shall—

• (a) if collected or received in Great Britain, be placed to the general account of the Commissioners kept at the Bank of England under section 11 of the Customs and Excise Act 1952 ;

• (b) if collected or received in Northern Ireland, be paid into the Consolidated Fund of the United Kingdom in such manner as the Treasury may direct.

• (4) The Government of Ireland Act 1920 shall have effect as if the tax were one of the taxes mentioned in section 22(1) of that Act (reserved taxes).

• (5) The Provisional Collection of Taxes Act 1968 shall be amended by inserting in subsection (1) of section 1, after the words " income tax " , the words " value added tax "; and the Act as so amended shall apply in relation to a resolution of the House of Commons passed before 1st April 1974 and providing for any variation of that tax as it applies in relation to such a resolution as is mentioned in subsection (2)(a) of that section.

Scope of tax

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• (1) Except as otherwise provided by this Part of this Act the tax shall be charged and payable as follows.

• (2) Tax on the supply of goods or services shall be charged only where—

• (a) the supply is a taxable supply; and

• (b) the goods or services are supplied by a taxable person in the course of a business carried on by him;

and shall be payable by the person supplying the goods or services.

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

• (4) Any reference in the following provisions of this Part of this Act to the supply by any person of goods or services is a reference to such a supply in the United Kingdom in the course of a business carried on by him.

Deduction of input tax

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• (1) The following tax (in this Part of this Act referred to as " input tax "), that is to say—

• (a) tax on the supply to a taxable person of any goods or services for the purpose of a business carried on or to be carried on by him; and

• (b) tax paid or payable by a taxable person on the importation of any goods used or to be used for the purpose of a business carried on or to be carried on by him;

may, at the end of any prescribed accounting period, be deducted by him, so far as not previously deducted and to the extent and subject to the exceptions provided for by or under this section, from the tax chargeable on supplies by him (in this section referred to as " output tax ").

• (2) Where the amount of input tax that may be so deducted by any person exceeds the amount of the output tax due from him, the amount of the excess shall be paid to him by the Commissioners.

• (3) Subject to subsection (6) of this section, the input tax that may be deducted by a taxable person shall be—

• (a) the whole of that tax, if all his supplies of goods or services are taxable supplies ; and

• (b) such part of that tax as, in accordance with regulations under this section, is attributable to taxable supplies, if some but not all of his supplies of goods or services are taxable supplies;

and any such regulations may provide for treating all supplies of goods or services by any person as taxable supplies where the tax attributable to exempt supplies would be less than such amount or less than such part of the whole of the tax as may be specified in the regulations or in such other circumstances as may be so specified.

• (4) 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

• (b) provisionally attributing input tax in accordance with the proportion so determined and adjusting the attribution for periods comprising two or more prescribed accounting periods or parts thereof ;

and may make different provision for different circumstances and, in particular (but without prejudice to the generality of this provision) for different descriptions of goods or services; and may contain such incidental and supplementary provisions as appear to the Commissioners necessary or expedient.

• (5) Regulations under this section may include provision for enabling a taxable person to deduct as input tax, in such circumstances, to such extent and subject to such conditions as may be specified in the regulations, 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.

• (6) The Treasury may by order make provision for excepting from the preceding provisions of this section input tax chargeable on such supplies and importations as may be specified in the order, and any such provision may be framed by reference to the description of goods or services supplied or goods imported, the persons 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 any such order may contain provision for consequential relief from output tax.

Taxable persons

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• (1) 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.

• (2) Schedule 1 to this Act shall have effect with respect to the registration of persons under this Part of this Act.

Supply

Supply of goods and services

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• (1) The following provisions apply for determining for the purposes of this Part of this Act what is a supply of goods or services.

• (2) Supply of goods includes all forms of supply and, in particular, the letting of goods on hire and the making of a gift or loan of goods; but supply of services does not include anything done otherwise than for a consideration.

• (3) Where a person produces goods by applying to another person's goods a treatment or process he is treated as supplying goods and not as supplying services.

• (4) The supply of any form of power, heat, refrigeration or ventilation is a supply of goods and not of services.

• (5) Schedule 2 to this Act shall have effect with respect to matters to be treated as a supply of goods.

• (6) The granting, assignment or surrender of a major interest in land shall be treated as a supply of goods.

In this subsection " major interest" means the fee simple or a tenancy for a term certain exceeding twenty-one years, and, in relation to Scotland, means the estate or interest of the proprietor of the dominium utile, or in the case of land not held on feudal tenure, the estate or interest of the owner, or the lessee's interest under a lease for a period exceeding twenty-one years.

• (7) Subject to the preceding provisions of this section, 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.

• (8) Subject to the preceding provisions of this section, anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of the whole or part of any right) is a supply of services.

Self-supply

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• (1) 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 of a business carried on by him and—

• (a) are neither supplied to another person nor incorporated in other goods produced in the course 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 both supplied to him for the purpose of that business and supplied by him in the course of that business.

• (2) 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 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 of that business.

• (3) 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.

Time of supply

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• (1) The following provisions of this section shall apply 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 tax.

• (2) Subject to the following provisions of this section, 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, but not later than twelve months after the removal.

• (3) Subject to the following provisions of this section, 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 subsection (3) of this section, the person making the supply issues a tax invoice in respect of it or if, before the time applicable under paragraph (a) or (b) of subsection (2) or subsection (3) of this section, 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 fourteen days after the time applicable under subsection (2) or subsection (3) of this section, the person making the supply issues a tax 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 (notwithstanding the preceding provisions of this section) 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) of this section 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 fourteen days there were substituted such longer period as may be specified in the direction.

• (7) Where goods are deemed to be supplied by virtue of paragraph 1 of Schedule 2 to this Act or section 6 of this Act, the supply shall be treated as taking place when they are applied or used as mentioned in that paragraph or section.

• (8) The Commissioners may by regulation make provision with respect to the time at which, notwithstanding the preceding provisions of this section, a supply is to be treated as taking place in cases where goods or services are supplied for a consideration the whole or part of which is determined or payable periodically or at the end of any period or where goods are supplied for a consideration the whole or part of which is determined at the time when the goods are appropriated for any purpose ; and any such regulations may provide—

• (a) for treating goods supplied on hire for any period as being successively supplied on hire for successive parts of that period ; and

• (b) for treating services supplied for any period as being successively supplied for successive parts of that period.

• (9) In this section " tax invoice " means such an invoice as is required under section 30(2) of this Act or would be so required if the person to whom the supply is made were a taxable person.

Place of supply

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• (1) The following provisions of this section shall apply for determining, for the purposes of the charge to tax, whether goods or services are supplied in the United Kingdom.

• (2) 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) If the supply of any goods involves their removal from the United Kingdom they shall be treated as supplied in the United Kingdom and if it involves their removal to the United Kingdom they shall be treated as supplied outside the United Kingdom.

• (4) Subject to subsection (5) of this section, if services might be considered as supplied either in or outside the United Kingdom or as supplied both in and outside the United Kingdom, they shall be treated as supplied in the United Kingdom if the person supplying them has his place of business or principal place of business in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom; but for the purposes of this subsection any person carrying on a business through a branch or agency in the United Kingdom shall be treated as having his principal place of business in the United Kingdom.

• (5) Where services consist of transport between places of which one is and the other is not in the United Kingdom, so much of the services as consists of transport within the United Kingdom shall be treated as supplied in the United Kingdom and the remainder as supplied outside the United Kingdom.

• (6) The Treasury may by order make provision, with respect to such services as may be specified in the order, for substituting for the provisions contained in subsection (4) or (5) of this section such other provisions as may be specified in the order, either generally or in such circumstances as may be so specified.

• (7) Where a supply of goods is such that subsections (2) and (3) of this section cannot be applied to it, subsections (4) and (6) of this section shall apply to it as they apply to a supply of services.

• (8) For the purposes 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.

Rate of tax and determination of value

Rate of tax

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• (1) Subject to the following provisions of this section, tax shall be charged at the rate of ten 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 Part of this Act; and

• (b) on the importation of goods, by reference to the value of the goods as determined under this Part of this Act.

• (2) The Treasury may by order made before 1st April 1973 substitute for the rate of ten per cent. a rate not lower than seven and a half per cent. nor higher than twelve and a half per cent.

• (3) The Treasury may by order increase or decrease the rate for the time being in force by such percentage thereof, not exceeding 20 percent., 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.

• (4) In relation to an order made under subsection (3) of this section 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 that would be in force if no order under that subsection had been made.

Value of supply of goods or services

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• (1) For the purposes of this Part of this Act the value of any supply of goods or services shall be determined as follows.

• (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 tax chargeable, is equal to the consideration.

• (3) If the supply is not for a consideration or is for a consideration not consisting or not wholly consisting of money, the value of the supply shall be taken to be its open market value.

• (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 Part 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) of this section 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.

• (6) This section has effect subject to Schedule 3 to this Act

Value of imported goods

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For the purposes of this Part of this Act the value of any imported goods shall be taken to be the aggregate of the following, that is to say,—

• (a) the amount that would fall to be taken as their value under section 258 of the Customs and Excise Act 1952 if value added tax were a duty of customs; and

• (b) the amount of any customs duty payable on the goods or of any payment or repayment made in order to secure relief from such customs duty under section 35 or section 36 of the Customs and Excise Act 1952 (relief on re-importation); and