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Value Added Tax Act 1994

Type Public General Act

Publication 1994-07-05

Last updated 2024-11-04

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

“tax period” means—a reporting period (under the accounting scheme under this Schedule), orany other period for which a person is required to make a return under a special scheme;

“UK VAT” means VAT which a person is liable to pay (whether in the United Kingdom or a member State) in respect of qualifying supplies treated as made in the United Kingdom at a time when the person is or was a participant in a special scheme;

“value added tax return”, in relation to a member State, means any value added tax return required to be submitted under any provision of the law of that member State which implements Article 369s of the VAT Directive;

“the VAT Directive” means Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax.

(2) References in this Schedule to qualifying supplies of goods being “treated as made”—

(a) in the United Kingdom are to their being treated as made in the United Kingdom by paragraph 38 or 39;

(b) in a member State are to their being treated as made in that member State by virtue of any provision of the law of that member State which gives effect to Article 33(c) of the VAT Directive.

SCHEDULE 9ZF

PART 1 — Modifications of this Act

1

This Act has effect subject to the following modifications.

1A

Section 3 (taxable persons and registration) has effect as if, after subsection (4), there were inserted—

(5) A person is not to be treated as being registered under this Act merely by virtue of the person being registered under the OSS scheme (within the meaning of Schedule 9ZD) or the IOSS scheme (within the meaning of Schedule 9ZE).

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(1) Section 80 (credit for, or repayment of, overstated or overpaid VAT) has effect subject to the following modifications.

(2) Subsection (7) has effect as if after “this section” there were inserted “(and paragraph 31 of Schedule 9ZD and paragraph 25 of Schedule 9ZE)”.

(3) That section has effect as if after subsection (7) there were inserted—

(8) References in this section to output tax include references to UK VAT paid under and in accordance with Schedule 9ZD or 9ZE by a person who is registered under the OSS scheme or IOSS scheme (as the case may be) but who is not a taxable person. (9) In subsection (8), “UK VAT”, the “OSS scheme” and the “IOSS scheme” have the same meanings as in Schedules 9ZD and 9ZE. (10) References in this section to a prescribed accounting period include a tax period (within the meanings of Schedules 9ZD and 9ZE).

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8

Schedule 1A (registration in respect of taxable supplies: non-UK establishment) has effect as if after paragraph 11 there were inserted—

(12) Paragraphs 8 to 11 are subject to paragraph 18 of Schedule 9ZD and paragraph 35 of Schedule 9ZE (cancellation of registration of persons seeking to be registered under the Schedule concerned).

8A

Schedule 11 (administration, collection and enforcement) has effect as if in paragraph 4 (power to require security and production of evidence), after sub-paragraph (1A) there were inserted—

(1B) For the purposes of sub-paragraph (1A) “VAT credit” includes a repayment of an amount of VAT paid under and in accordance with Schedule 9ZD or 9ZE (the OSS and IOSS schemes).

PART 2 — Modifications etc of other Acts

Finance Act 2007

9

In Schedule 24 to FA 2007, paragraph 1 (error in taxpayer's document) has effect as if—

(a) in the table, after the entry relating to a VAT return, statement or declaration in connection with a claim there were inserted—

VAT	Return under a special accounting scheme.

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(b) before sub-paragraph (5) there were inserted—

(4A) In this paragraph “return under a special accounting scheme” means any of the following, so far as relating to supplies of goods treated as made in the United Kingdom— (a) an OSS scheme return or a relevant non-UK return under Schedule 9ZD to VATA 1994 (see paragraphs 11 and 22(3) of that Schedule); (b) a relevant special scheme return under Schedule 9ZE to VATA 1994 (see paragraphs 11 and 16(3) of that Schedule). (4B) In a case where a return under a special accounting scheme is required to be submitted to an authority other than HMRC, for the purposes of sub-paragraph (1) the return is regarded as given to HMRC when it is submitted to that authority.

Finance Act 2009

10

FA 2009 has effect subject to the following modifications.

11

Section 101 (late payment interest on sums due to HMRC) has effect as if after subsection (9) there were inserted—

(10) The reference in subsection (1) to amounts payable to HMRC includes— (a) amounts of UK VAT payable under a non-UK scheme; (b) amounts of UK VAT payable under a special scheme; (c) amounts payable under Schedule 26 to FA 2021 by way of penalties in relation to a failure to pay an amount of UK VAT— (i) payable under paragraph 10(2) of Schedule 9ZD, or paragraph 10(2) of Schedule 9ZE, to VATA 1994; (ii) payable under a non-UK scheme in respect of scheme supplies treated as made in the United Kingdom, or a special scheme in respect of qualifying supplies of goods treated as made in the United Kingdom; (iii) shown in an assessment made by HMRC in default of an OSS scheme return or a relevant non-UK return; (iv) shown in an assessment made by HMRC in default of a relevant special scheme return. and references in Schedule 53 to amounts due or payable to HMRC are to be read accordingly. (11) In subsection (10)— (a) expressions that are also used in Schedule 9ZD to VATA 1994 (the OSS scheme) have the same meaning that they have in that Schedule, and (b) expressions that are also used in Schedule 9ZE to VATA 1994 (the IOSS scheme) have the same meaning that they have in that Schedule

11A

Section 102 (repayment interest on sums to be paid by HMRC) has effect as if after subsection (1) there were inserted—

(1A) This section also applies to an amount paid by a person to a person other than HMRC that is repaid by HMRC under— (a) paragraph 31(4) of Schedule 9ZD, or paragraph 25(4) of Schedule 9ZE, to VATA 1994; (b) section 36(2) of VATA 1994 by virtue of paragraph 34 of Schedule 9ZD, or paragraph 28 of Schedule 9ZE, to VATA 1994.

11B

Part 2 of Schedule 54 (repayment interest: special provision as to repayment interest start date) has effect as if after paragraph 12C there were inserted—

(12CA) (1) This paragraph applies in the case of any payment (or repayment) under— (a) paragraph 31(4) of Schedule 9ZD, or paragraph 25(4) of Schedule 9ZE, to VATA 1994; (b) section 36(2) of VATA 1994 by virtue of paragraph 34 of Schedule 9ZD, or paragraph 28 of Schedule 9ZE, to VATA 1994. (2) The repayment interest start date is the later of— (a) the date (if any) on which the claim giving rise to the payment (or repayment) was required to be made, and (b) the date on which the claim was in fact made.

11C

Part 2A of Schedule 54 (repayment interest: VAT: special provision as to period for which amount carries interest) has effect as if—

(a) at the beginning of paragraph 12D there were inserted “Subject to paragraph 12DA,”;

(b) after paragraph 12D there were inserted—

(12DA) In this Part of this Schedule— - “prescribed accounting period” also includes a tax period within the meanings of Schedules 9ZD and 9ZE to VATA 1994; - “VAT credit” also includes a repayment to persons who are not taxable persons (within the meaning of VATA 1994) of an amount of VAT paid under and in accordance with Schedule 9ZD or 9ZE to that Act; - “VAT return” also includes—an OSS scheme return or a relevant non-UK return within the meaning of Schedule 9ZD to VATA 1994;a relevant special scheme return within the meaning of Schedule 9ZE to VATA 1994.

11D

Part 2 of Schedule 54A (further provision as to late payment interest and repayment interest: Value Added Tax) has effect as if—

(a) at the beginning of paragraph 5 there were inserted “Subject to paragraph 5A”;

(b) after paragraph 5 there were inserted—

(5A) In this Part of this Schedule— - “prescribed accounting period” also includes a tax period within the meanings of Schedules 9ZD and 9ZE to VATA 1994; - “VAT credit” also includes a repayment to persons who are not taxable persons (within the meaning of VATA 1994) of an amount of VAT paid under and in accordance with Schedule 9ZD or 9ZE to that Act.

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Taxation (Cross-border Trade) Act 2018

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(1) Section 54 of the Taxation (Cross-border Trade) Act 2018 (prohibition on collection of certain taxes or duties on behalf of country or territory without reciprocity) does not apply in relation to VAT collected by HMRC under Schedule 9ZD or 9ZE.

(2) But sub-paragraph (1) is not to be read as having any bearing on whether or not, in the absence of that sub-paragraph, accounting for VAT collected under those Schedules would otherwise have been authorised.

Finance Act 2021

13A

(1) Schedule 26 to FA 2021 (penalties for failure to pay tax) has effect subject to the following modifications.

(2) Paragraph 1(1) has effect as if in the table headed “Value added tax”, after item 1 there were inserted—

1A	Amount of UK VAT payable under paragraph 10(2) of Schedule 9ZD to VATA 1994	The date determined in accordance with paragraph 13(1) of Schedule 9ZD to VATA 1994 as the date by which the amount must be paid
1B	Amount of UK VAT payable under paragraph 10(2) of Schedule 9ZE to VATA 1994	The date determined in accordance with paragraph 13(1) of Schedule 9ZE to VATA 1994 as the date by which the amount must be paid
1C	Amount of UK VAT payable to the tax authorities for the administering member State under a non-UK scheme in respect of scheme supplies treated as made in the United Kingdom	The date by which a non-UK return relating to the amount must be submitted
1D	Amount of UK VAT payable to the tax authorities for the administering member State under a special scheme in respect of qualifying supplies of goods treated as made in the United Kingdom	The date by which a special scheme return relating to the amount must be submitted

(3) Paragraph 1(2) has effect as if—

(a) the words from “annual” to the end became paragraph (a), and

(b) after that paragraph there were inserted—

(b) terms used in entries 1A and 1C that are also used in Schedule 9ZD to VATA 1994 have the meanings given in that Schedule, and (c) terms used in entries 1B and 1D that are also used in Schedule 9ZE to VATA 1994 have the meanings given in that Schedule

(4) Paragraph 3 has effect as if—

(a) after sub-paragraph (2) there were inserted—

(2A) An assessment or determination is also made by HMRC in default of a return if it is made where— (a) a person is required to submit an OSS scheme return or a relevant non-UK return (within the meanings of Schedule 9ZD to VATA 1994) or a relevant special scheme return (within the meaning of Schedule 9ZE to VATA 1994), (b) that person fails to submit the return on or before the date by which it is required to be submitted, and (c) if the return had been submitted as required the return would have shown that an amount falling within item 1A, 1B, 1C or 1D of the table in paragraph 1 headed “Value added tax” was due and payable.

;

(b) in sub-paragraph (3), after “(2)” there were inserted “or (2A)”.

PART 3 — Modifications of secondary legislation

Value Added Tax Regulations 1995

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The Value Added Tax Regulations 1995 (S.I. 1995/2518) have effect subject to the following modifications.

15

In Part 5A (reimbursement arrangements), regulation 43A (interpretation of Part 5A) has effect as if, in the definition of “claim”, after paragraph (a) there were inserted—

(b) a claim made under paragraph 31 of Schedule 9ZD, or paragraph 25 of Schedule 9ZE, to the Act (claims which have effect for the purpose of section 80(3) of the Act as if they were section 80 claims).

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(1) Part 19 (bad debt relief (the new scheme)) has effect subject to the following modifications.

(2) Regulation 165 (interpretation of Part 19) has effect as if—

(a) in the definition of “claim”, after “regulations 166” there were inserted “ or 166A ”;

(b) in the definition of “return”, after “regulation 25” there were inserted “but “relevant non-UK return” has the meaning given by paragraph 22(3) of Schedule 9ZD to the Act and “relevant special scheme return” has the meaning given by paragraph 16(3) of Schedule 9ZE to the Act”;

“tax period” has the meaning given by paragraph 38 of Schedule 9ZD or paragraph 43 of Schedule 9ZE (as the case may be) to the Act

(3) Regulation 166 (the making of a claim to the Commissioners) has effect as if, at the beginning of paragraph (1) there were inserted “Subject to regulation 166A, and”.

(4) That Part has effect as if after regulation 166 there were inserted—

(166AA) (1) This regulation applies where the VAT on the relevant supply was accounted for on a relevant non-UK return or a relevant special scheme return. (2) Where this regulation applies, the claimant must make the claim by— (a) amending, in accordance with Article 61 of the Implementing Regulation, that relevant non-UK return or relevant special scheme return, or (b) (where the period during which a person is entitled to make such an amendment has expired) notifying the Commissioners of the claim in writing in English.

(5) Regulation 168 (records required to be kept by the claimant) has effect as if after paragraph (3) there were inserted—

(4) Where regulation 166AA applies, “prescribed accounting period” in this regulation is to be read as “tax period”.

(6) Regulation 171 (repayment of a refund) has effect as if at—

(a) at the beginning of paragraph (1) there were inserted “Subject to regulation 171A,”;

(b) at the beginning of paragraph (2) there were inserted “Subject to regulation 171B,”;

(7) Those Regulations have effect as if after regulation 171 there were inserted—

(171A) In a case falling within sub-paragraph (b)(iii) of regulation 171(1) where the VAT on the relevant supply was accounted for on a relevant non-UK return or a relevant special scheme return, the amount to be repaid is such an amount as is equal to the amount by which the VAT chargeable on the relevant supply is reduced. (171B) (1) Where— (a) the VAT on the relevant supply was accounted for on a relevant non-UK return or a relevant special scheme return, and (b) a repayment is required by regulation 171(1), that repayment must be made no later than twenty days after the end of the tax period in which the payment for the relevant supply is received or the reduction in consideration is accounted for in the claimant's business accounts. (2) Where— (a) the VAT on the relevant supply was accounted for on a relevant non-UK return or a relevant special scheme return, and (b) a repayment is required by regulation 171(3), that repayment must be made no later than twenty days after the end of the tax period in which the failure to comply first occurred. (3) In either case the repayment must be made by— (a) amending the relevant non-UK return or the relevant special scheme return for the tax period in which the VAT on the relevant supply was brought into account, or (b) (where the relevant period has expired) sending the sum due to the Commissioners. (4) In sub-paragraph (3)(b), the “relevant period” is the period of 3 years beginning with the day on which the relevant non-UK return or the relevant special scheme return for the tax period in which the VAT on the relevant supply was brought into account was required to be submitted.

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(1) Part 20A of those Regulations (Repayments to EU traders incurring VAT on goods in Northern Ireland) has effect subject to the following modifications.

(2) Regulation 184D has effect as if, in the alternative version of regulation 173B(2)(c), after “Northern Ireland” there were inserted “, unless it is a supply or importation—

(a) that is a scheme supply for the purposes of Schedule 9ZD to the Act, and

(b) that is made by a person who is registered under that Schedule when the supply is made”;

(3) Regulation 184I has effect as if, in the alternative version of regulation 173L(2), after “Northern Ireland” there were inserted “, unless it is a supply—

(a) that is a scheme supply for the purposes of Schedule 9ZD of the Act, and

(b) that is made by a person who is registered under that Schedule when the supply is made”.

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The Regulations have effect as if after regulation 213 there were inserted—

(214) (1) In this Part— - “applicant” means a person making a registration request under paragraph 5 of Schedule 9ZD or paragraph 5 of Schedule 9ZE to the Act; - “principal VAT Directive” means Council Directive 2006/112/EC of 28 November on the common system of value added tax; - “relevant place” means Northern Ireland or a member State. (2) In regulations 215 and 216, references to a number allocated under Article 362 of the principal VAT Directive mean a number allocated at any time under that Article. (215) A registration request under paragraph 5 of Schedule 9ZD to the Act must contain details of— (a) any VAT identification number or tax reference number by which the applicant is identified for VAT purposes by any relevant place in accordance with Article 214, Article 239 or Article 240 of the principal VAT Directive, and the name of that relevant place, (b) any number previously allocated to the applicant by a member State or the United Kingdom under Article 362 of the principal VAT Directive, or otherwise for the purposes of Article 369d of the principal VAT Directive, and the name of that relevant place, (c) where the applicant has previously been identified under a non-UK scheme (within the meaning of Schedule 9ZD to the Act), the date the applicant ceased to be so identified, (d) whether the applicant is treated as a member of a group under any of sections 43A to 43D of the Act, and (e) the name of any relevant place in which the applicant has a fixed establishment, and the address of each such fixed establishment. (216) A registration request under paragraph 5 of Schedule 9ZE to the Act must contain details of— (a) any VAT identification number or tax reference number by which the applicant is identified for VAT purposes by any relevant place in accordance with Article 214, Article 239 or Article 240 of the principal VAT Directive, and the name of that relevant place, and (b) any number previously allocated to the applicant by a member State or the United Kingdom under Article 362 of the principal VAT Directive, or otherwise for the purposes of Article 369q of the principal VAT Directive, and the name of that relevant place. (217) A registration request under paragraph 5 of Schedule 9ZD or paragraph 5 of Schedule 9ZE to the Act must also contain a declaration by the applicant that the information the applicant has provided in the registration request is accurate and complete to the best of the applicant's knowledge. (218) The following communications must be made by using the electronic portal set up by the Commissioners for the purposes of implementing Sections 3 and 4 of Chapter 6 of Title XII to the principal VAT Directive— (a) a registration request under paragraph 5 of Schedule 9ZD or paragraph 5 of Schedule 9ZE to the Act; (b) the information required by paragraph 8 of Schedule 9ZD or paragraph 8 of Schedule 9ZE to the Act; (c) a return required under paragraph 11 of Schedule 9ZD or paragraph 11 of Schedule 9ZE to the Act. (219) In this Part, “tax period” has the meaning given by paragraph 38 of Schedule 9ZD or paragraph 43 of Schedule 9ZE (as the case may be) to the Act. (219A) (1) Any amendment to a return under a special accounting scheme for a tax period in which a relevant supply was brought into account must— (a) be made in a subsequent return under a special accounting scheme of the same type, (b) be made before the end of the period of three years beginning with the day on which the return for the tax period in which the relevant supply was brought into account was required to be submitted, and (c) include details of— (i) the member State in which the relevant supply was made; (ii) the tax period to which the amendment relates; (iii) the amount of VAT concerned. (2) In this regulation, “return under a special accounting scheme” means any of the following, so far as relating to supplies of goods treated as made in the United Kingdom— (a) an OSS scheme return or a relevant non-UK return under Schedule 9ZD to the Act (see paragraphs 11 and 22(3) of that Schedule); (b) an IOSS scheme return or a relevant special scheme return under Schedule 9ZE to VATA 1994 (see paragraphs 11 and 16(3) of that Schedule). (220) (1) In this regulation “notice” means a notice given under paragraph 25(3) of Schedule 9ZD or paragraph 19(3) of Schedule 9ZE to the Act. (2) A person giving a notice (P) must do so— (a) no later than 4 years after the end of the tax period in respect of which the return identified in the notice was required to be made; and (b) in writing in English. (3) P must also provide such documentary evidence in support of the notice as P possesses. (221) (1) A person making a claim under paragraph 31(1) of Schedule 9ZD, or paragraph 25(1) of Schedule 9ZE, to the Act must provide to the Commissioners at the time of making the claim a statement in writing in English explaining how the claim is calculated. (2) A person making a claim under any other provision of paragraph 31 of Schedule 9ZD, or paragraph 25 of Schedule 9ZE to the Act must— (a) make that claim to the Commissioners, and (b) provide to the Commissioners at the time of making the claim a statement in writing in English explaining how the claim is calculated. (222) (1) A claim or other notice made under paragraph 33(2)(b) of Schedule 9ZD or paragraph 27(2)(b) of Schedule 9ZE to the Act must be made in writing in English. (2) A person making a payment— (a) under paragraph 33(3) of Schedule 9ZD to the Act in a case falling within paragraph 33(2)(b) of that Schedule, or (b) under paragraph 27(3) of Schedule 9ZE to the Act in a case falling within paragraph 27(2)(b) of that Schedule, must do so no later than twenty days after the end of the tax period in which the increase in consideration is accounted for in the person's business accounts. (223) (1) Paragraph 19(1) of Schedule 9ZD to the Act is not to apply in the case of an input tax obligation. (2) In this regulation “input tax obligation” means an obligation imposed on a taxable person relating to a claim to deduction under section 25(2) of the Act or to payment of a VAT credit.

SCHEDULE 9A

Power to give directions

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(1) Subject to paragraph 2 below, the Commissioners may give a direction under this Schedule if, in any case—

(a) a relevant event has occurred;

(b) the condition specified in sub-paragraph (3) below is fulfilled;

(d) in the case of an event falling within sub-paragraph (2)(b) below, the transaction in question is not a supply which is the only supply by reference to which the case falls within paragraphs (a) to (c) above.

(2) For the purposes of this Schedule, a relevant event occurs when a person—

(a) begins to be, or ceases to be, treated as a member of a group; or

(b) enters into any transaction.

(3) The condition mentioned in sub-paragraph (1) above is that—

(a) there has been, or will or may be, a taxable supply on which VAT has been, or will or may be, charged otherwise than by reference to the supply’s full value;

(b) there is at least a part of the supply which is not or, as the case may be, would not be zero-rated; and

(c) the charging of VAT on the supply otherwise than by reference to its full value gives rise or, as the case may be, would give rise to a tax advantage.

(4) For the purposes of this paragraph the charging of VAT on a supply (“the undercharged supply”) otherwise than by reference to its full value shall be taken to give rise to a tax advantage if, and only if, a person has become entitled—

(a) to credit for input tax allowable as attributable to that supply or any part of it, or

(b) in accordance with regulations under section 39, to any repayment in respect of that supply or any part of it.

(5) The cases where a person shall be taken for the purposes of sub-paragraph (4) above to have become entitled to a credit for input tax allowable as attributable to the undercharged supply, or to a part of it, shall include any case where—

(a) a person has become entitled to a credit for any input tax on the supply to him, or the ... importation by him, of any goods or services; and

(b) whatever the supplies to which the credit was treated as attributable when the entitlement to it arose, those goods or services are used by him in making the undercharged supply, or a part of it.

(6) For the purposes of sub-paragraphs (4) and (5) above where—

(a) there is a supply of any of the assets of a business of a person (“the transferor”) to a person to whom the whole or any part of that business is transferred as a going concern (“the transferee”), and

(b) that supply is treated, in accordance with an order under section 5(3), as being neither a supply of goods nor a supply of services,

the question, so far as it falls to be determined by reference to those assets, whether a credit for input tax to which any person has become entitled is one allowable as attributable to the whole or any part of a supply shall be determined as if the transferor and the transferee were the same person.

(7) Where, in a case to which sub-paragraph (6) above applies, the transferor himself acquired any of the assets in question by way of a supply falling within paragraphs (a) and (b) of that sub-paragraph, that sub-paragraph shall have the effect, as respects the assets so acquired, of requiring the person from whom those assets were acquired to be treated for the purposes of sub-paragraphs (4) and (5) above as the same person as the transferor and the transferee, and so on in the case of any number of successive supplies falling within those paragraphs.

(8) For the purposes of this paragraph any question—

(a) whether any credit for input tax to which a person has become entitled was, or is to be taken to have been, a credit allowable as attributable to the whole or any part of a supply, or

(b) whether any repayment is a repayment in respect of the whole or any part of a supply,

shall be determined, in relation to a supply of a right to goods or services or to a supply of goods or services by virtue of such a right, as if the supply of the right and supplies made by virtue of the right were a single supply of which the supply of the right and each of those supplies constituted different parts.

(9) References in this paragraph to the full value of a supply are references to the amount which (having regard to any direction under paragraph 1 of Schedule 6) would be the full value of that supply for the purposes of the charge to VAT if that supply were not a supply falling to be disregarded, to any extent, in pursuance of section 43(1)(a).

(10) References in this paragraph to the supply of a right to goods or services include references to the supply of any right, option or priority with respect to the supply of goods or services, and to the supply of an interest deriving from any right to goods or services.

Restrictions on giving directions

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(1) The Commissioners shall not give a direction under this Schedule by reference to a relevant event if they are satisfied that—

(a) the change in the treatment of the person, or

(b) the transaction in question,

had as its main purpose or, as the case may be, as each of its main purposes a genuine commercial purpose unconnected with the fulfilment of the condition specified in paragraph 1(3) above.

(2) This paragraph shall not apply where the relevant event is the termination of a person's treatment as a member of a group by a notice under section 43C(1) or (3).

Form of directions under Schedule

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(1) The directions that may be given by the Commissioners under this Schedule are either—

(a) a direction relating to any supply of goods or services that has been made, in whole or in part, by one person to another; or

(b) a direction relating to a particular person.

(2) A direction under this Schedule relating to a supply shall require it to be assumed (where it would not otherwise be the case) that, to the extent described in the direction, the supply was not a supply falling to be disregarded in pursuance of section 43(1)(a).

(3) A direction under this Schedule relating to a person shall require it to be assumed (where it would not otherwise be the case) that, for such period (comprising times before the giving of the direction or times afterwards or both) as may be described in the direction, the person—

(a) did not fall to be treated, or is not to be treated, as a member of a group, or of a particular group so described; or

(b) fell to be treated, or is to be treated, as a member of any group so described of which, for that period, it was or is eligible to be a member.

(4) Where a direction under this Schedule requires any assumptions to be made, then—

(a) so far as the assumptions relate to times on or after the day on which the direction is given, this Act shall have effect in relation to such times in accordance with those assumptions; and

(b) paragraph 6 below shall apply for giving effect to those assumptions in so far as they relate to earlier times.

(5) A direction falling within sub-paragraph (3)(b) above may identify in relation to any times or period the person who is to be assumed to have been, or to be, the representative member of the group at those times or for that period.

(6) A direction under this Schedule may vary the effect of a previous direction under this Schedule.

(7) The Commissioners may at any time, by notice in writing to the person to whom it was given, withdraw a direction under this Schedule.

(8) The refusal or non-refusal by the Commissioners of an application such as is mentioned in section 43B shall not prejudice the power of the Commissioners to give a direction under this Schedule requiring any case to be assumed to be what it would have been had the application not been refused or, as the case may be, had it been refused.

Time limit on directions

4

(1) A direction under this Schedule shall not be given more than six years after whichever is the later of—

(a) the occurrence of the relevant event by reference to which it is given; and

(b) the time when the relevant entitlement arose.

(2) A direction under this Schedule shall not be given by reference to a relevant event occurring on or before 28th November 1995.

(3) Subject to sub-paragraphs (1) and (2) above, a direction under this Schedule—

(a) may be given by reference to a relevant event occurring before the coming into force of this Schedule; and

(b) may require assumptions to be made in relation to times (including times before 29th November 1995) falling before the occurrence of the relevant event by reference to which the direction is given, or before the relevant entitlement arose.

(4) For the purposes of this paragraph the reference, in relation to the giving of a direction, to the relevant entitlement is a reference to the entitlement by reference to which the requirements of paragraph 1(4) above are taken to be satisfied for the purposes of that direction.

Manner of giving directions

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(1) A direction under this Schedule relating to a supply may be given to—

(a) the person who made the supply to which the direction relates; or

(b) any person who, at the time when the direction is given, is the representative member of a group of which the person mentioned in paragraph (a) was treated as being a member at the time of the supply.

(2) A direction under this Schedule relating to a person (“the relevant person”) may be given to that person or to any person who at the time when the direction is given is, or in pursuance of the direction is to be treated as, the representative member of a group of which the relevant person—

(a) is treated as being a member;

(b) was treated as being a member at a time to which the direction relates; or

(3) A direction given to any person under this Schedule shall be given to him by notice in writing.

(4) A direction under this Schedule must specify the relevant event by reference to which it is given.

Assessment in consequence of a direction

6

(1) Subject to sub-paragraph (3) below, where—

(a) a direction is given under this Schedule, and

(b) there is an amount of VAT (“the unpaid tax”) for which a relevant person would have been liable before the giving of the direction if the facts had accorded with the assumptions specified in the direction,

the Commissioners may, to the best of their judgement, assess the amount of unpaid tax as tax due from the person to whom the direction was given or another relevant person and notify their assessment to that person.

(2) In sub-paragraph (1) above the reference to an amount of VAT for which a person would, on particular assumptions, have been liable before the giving of a direction under this Schedule is a reference to the aggregate of the following—

(a) any amount of output tax which, on those assumptions but not otherwise, would have been due from a relevant person at the end of a prescribed accounting period ending before the giving of the direction;

(b) the amount of any credit for input tax to which a relevant person is treated as having been entitled at the end of such an accounting period but to which he would not have been entitled on those assumptions; and

(c) the amount of any repayment of tax made to a relevant person in accordance with regulations under section 39 but to which he would not have been entitled on those assumptions.

(3) Where any assessment falls to be made under this paragraph in a case in which the Commissioners are satisfied that the actual revenue loss is less than the unpaid tax, the total amount to be assessed under this paragraph shall not exceed what appears to them, to the best of their judgement, to be the amount of that loss.

(4) For the purposes of the making of an assessment under this paragraph in relation to any direction, the actual revenue loss shall be taken to be equal to the amount of the unpaid tax less the amount given by aggregating the amounts of every entitlement—

(a) to credit for input tax, or

(b) to a repayment in accordance with regulations under section 39,

which (whether as an entitlement of the person in relation to whom the assessment is made or as an entitlement of any other person) would have arisen on the assumptions contained in the direction, but not otherwise.

(5) An assessment under this paragraph relating to a direction may be notified to the person to whom that direction is given by being incorporated in the same notice as that direction.

(6) An assessment under this paragraph shall not be made—

(a) more than one year after the day on which the direction to which it relates was given, or

(b) in the case of any direction that has been withdrawn.

(7) Where an amount has been assessed on any person under this paragraph and notified to him—

(a) that amount shall be deemed (subject to the provisions of this Act as to appeals) to be an amount of VAT due from him;

(b) that amount may be recovered accordingly, either from that person or, in the case of a person who is for the time being treated as a member of a group, from the representative member of that group; and

(c) to the extent that more than one person is liable by virtue of any assessment under this paragraph in respect of the same amount of unpaid tax, those persons shall be treated as jointly and severally liable for that amount.

(8) Sub-paragraph (7) above does not have effect if or to the extent that the assessment in question has been withdrawn or reduced.

(9) Section 77(6) applies in relation to an assessment under this paragraph as it applies in relation to an assessment under section 73 or 76.

(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11) In this paragraph “ a relevant person ”, in relation to a direction, means—

(a) the person to whom the direction is given;

(b) the person who was the representative member of any group of which the person mentioned in paragraph (a) was treated as being, or in pursuance of the direction is to be treated as having been, a member at a time to which the assumption specified in the direction relates; or

(c) any person who, in pursuance of the direction, is to be treated as having been the representative member of such a group.

Interpretation of Schedule etc.

7

(1) References in this Schedule to being treated as a member of a group and to being eligible to be treated as a member of a group shall be construed in accordance with section 43 to 43C.

(2) For the purposes of this Schedule the giving of any notice or notification to any receiver, liquidator or person otherwise acting in a representative capacity in relation to another shall be treated as the giving of a notice or, as the case may be, notification to the person in relation to whom he so acts.

SCHEDULE 10

PART 1 — THE OPTION TO TAX LAND

Introduction

Overview of the option to tax

1

(1) This Part of the Schedule makes provision for a person to opt to tax any land.

(2) The effect of the option to tax is dealt with in paragraph 2 (exempt supplies become taxable), as read with paragraph 3.

(3) Grants are excluded from the effect of paragraph 2 by—

(a) paragraph 5 (dwellings designed or adapted, and intended for use, as dwelling etc),

(b) paragraph 6 (conversion of buildings for use as dwelling etc),

(d) paragraph 8 (residential caravans),

(e) paragraph 9 (residential houseboats),

(f) paragraph 10 (relevant housing associations), and

(g) paragraph 11 (grant to individual for construction of dwelling).

(4) Paragraphs 12 to 17 (anti-avoidance: developers of land etc) provide for certain supplies to which any grant gives rise to be excluded from the effect of paragraph 2.

(5) Paragraphs 18 to 30 deal with—

(a) the scope of the option to tax,

(b) the day from which the option to tax has effect,

(d) elections to opt to tax land subsequently acquired,

(e) the revocation of the option,

(f) the effect of the option to tax in relation to new buildings, and

(g) requirements for prior permission in the case of exempt grants made before the exercise of an option to tax.

(6) Paragraphs 31 to 34 deal with definitions which apply for the purposes of this Part, as well as other supplemental matters.

The option to tax

Effect of the option to tax: exempt supplies become taxable

2

(1) This paragraph applies if—

(a) a person exercises the option to tax any land under this Part of this Schedule, and

(b) a grant is made in relation to the land at any time when the option to tax it has effect.

(2) If the grant is made—

(a) by the person exercising that option, or

(b) by a relevant associate (if that person is a body corporate),

the grant does not fall within Group 1 of Schedule 9 (exemptions for land).

(3) For the meaning of “relevant associate”, see paragraph 3.

Meaning of “relevant associate”

3

(1) This paragraph explains for the purposes of this Part of this Schedule what is meant by a “relevant associate” in a case where a person (“the opter”) exercises an option to tax in relation to any building or land.

(2) A person is a relevant associate of the opter if under sections 43A to 43D (groups of companies) the person—

(a) was treated as a member of the same group as the opter at the time when the option first had effect,

(b) has been so treated at any later time when the opter had a relevant interest in the building or land, or

(c) has been treated as a member of the same group as a person within paragraph (a) or (b) of this sub-paragraph at a time when that person had a relevant interest in the building or land.

(3) But a person (“P”) ceases to be a relevant associate of the opter in relation to the building or land in the following circumstances.

(4) P ceases to be a relevant associate of the opter in relation to the building or land at the time when all of the following conditions are first met—

(a) P has no relevant interest in the building or land ,

(aa) where P has disposed of such an interest, it is not the case that a supply for the purposes of the charge to VAT in respect of the disposal—

(i) is yet to take place, or

(ii) would be yet to take place if one or more conditions (such as the happening of an event or the doing of an act) were to be met,

(b) P or the opter is not treated under sections 43A to 43D as a member of the group mentioned above, and

(c) P is not connected with any person who has a relevant interest in the building or land where that person is the opter or another relevant associate of the opter.

(5) P also ceases to be a relevant associate of the opter in relation to the building or land if P—

(a) meets conditions specified in a public notice (see paragraph 4), or

(b) gets the prior permission of the Commissioners (also, see that paragraph).

The time when P ceases to be a relevant associate of the opter is determined in accordance with that paragraph.

(6) In this paragraph “relevant interest in the building or land” means an interest in, right over or licence to occupy the building or land (or any part of it).

Permission for a body corporate to cease to be a relevant associate of the opter

4

(1) This paragraph applies for the purposes of paragraph 3(5) in relation to a person (“P”) who has been a relevant associate of the opter.

(2) If the conditions specified in the public notice under paragraph 3(5)(a) are met in relation to P, P ceases to be a relevant associate of the opter only if notification of those conditions being met is given to the Commissioners.

(3) The notification must—

(a) be made in a form specified in a public notice,

(b) state the day from which P is to cease to be a relevant associate of the opter (which may not be before the day on which the notification is given),

(c) contain a statement by P certifying that, on that day, the conditions specified in the public notice under paragraph 3(5)(a) are met in relation to P, and

(d) contain other information specified in a public notice.

(4) An application for the prior permission of the Commissioners must—

(a) be made in a form specified in a public notice,

(b) contain a statement by P certifying which (if any) of the conditions specified in the public notice under paragraph 3(5)(a) are met in relation to P, and

(5) If P gets the prior permission of the Commissioners, P ceases to be a relevant associate of the opter from—

(a) the day on which the Commissioners give their permission, or

(b) such earlier or later day as they specify in their permission.

(6) The Commissioners may specify an earlier day only if—

(a) P has purported to give a notification of P's ceasing to be a relevant associate of the opter,

(b) the conditions specified in the public notice are not, in the event, met in relation to P, and

(7) The day specified may be the day from which P would have ceased to be a relevant associate of the opter if those conditions had been so met.

(8) The Commissioners may specify conditions subject to which their permission is given and, if any of those conditions are broken, they may treat the application as if it had not been made.

Exclusions from effect of option to tax

Dwellings designed or adapted, and intended for use, as dwelling etc

5

(1) An option to tax has no effect in relation to any grant in relation to a building or part of a building if the building or part of the building is designed or adapted, and is intended, for use—

(a) as a dwelling or number of dwellings, or

(b) solely for a relevant residential purpose.

(2) In relation to the expression “relevant residential purpose”, see the certification requirement imposed as a result of the application of Note (12) of Group 5 of Schedule 8 by paragraph 33 of this Schedule.

Conversion of buildings for use as dwelling etc

6

(1) An option to tax has no effect in relation to any grant made to a person (“the recipient”) in relation to a building or part of a building if the recipient certifies that the building or part of the building is intended for use—

(a) as a dwelling or number of dwellings, or

(b) solely for a relevant residential purpose.

(2) The recipient must give the certificate to the person making the grant (“the seller”)—

(a) within the period specified in a public notice, or

(b) if the seller agrees, at any later time before the seller makes a supply to which the grant gives rise.

(3) The recipient may give the certificate to the seller only if the recipient—

(a) intends to use the building or part of the building as mentioned above,

(b) has the relevant conversion intention, or

(4) The recipient is a relevant intermediary if—

(a) the recipient intends to dispose of the relevant interest to another person, and

(b) that other person gives the recipient a certificate stating that the other person has the relevant conversion intention or the relevant disposal intention.

(5) For this purpose a person has the relevant disposal intention if—

(a) the person intends to dispose of the relevant interest to a third person, and

(b) the third person gives a qualifying certificate to the person.

(6) A person (P) gives a qualifying certificate to another if P gives a certificate to that other person stating that P has the relevant conversion intention or intends to dispose of the relevant interest to another person (Q) who has given a certificate to P stating—

(a) that Q has the relevant conversion intention, or

(b) that Q intends to dispose of the relevant interest to another person who has given a qualifying certificate to Q,

and so on (in the case of further disposals of the relevant interest).

(7) In this paragraph—

“the relevant conversion intention”, in relation to a person, means an intention of the person to convert the building or part of the building with a view to its being used as mentioned above, and

“the relevant interest”, in relation to any interest in the building or part of the building to which the grant gives rise, means the whole of that interest.

(8) For the purposes of this paragraph a building or part of a building is not to be regarded as intended for use as a dwelling or number of dwellings at any time if there is intended to be a period before that time during which it will not be so used (but disregarding use for incidental or other minor purposes).

(9) For the purposes of this paragraph the reference to use solely for a relevant residential purpose is to be read without regard to Note (12) of Group 5 of Schedule 8 (which would otherwise apply as a result of paragraph 33 of this Schedule).

(10) The Commissioners may publish a notice for the purposes of this paragraph—

(a) preventing a person from giving any certificate under this paragraph unless the person meets conditions specified in the notice,

(b) specifying the form in which any certificate under this paragraph must be made, and

Charities

7

(1) An option to tax has no effect in relation to any grant made to a person in relation to a building or part of a building intended by the person for use—

(a) solely for a relevant charitable purpose, but

(b) not as an office.

(2) In relation to the expression “relevant charitable purpose”, see the certification requirement imposed as a result of the application of Note (12) of Group 5 of Schedule 8 by paragraph 33 of this Schedule.

Residential caravans

8

(1) An option to tax has no effect in relation to any grant made in relation to a pitch for a residential caravan.

(2) A caravan is not a residential caravan if residence in it throughout the year is prevented by the terms of a covenant, statutory planning consent or similar permission.

Residential houseboats

9

(1) An option to tax has no effect in relation to any grant made in relation to facilities for the mooring of a residential houseboat.

“Mooring” includes anchoring or berthing.

(2) In this paragraph—

(a) “houseboat” means a houseboat within the meaning of Group 9 of Schedule 8, and

(b) a houseboat is not a residential houseboat if residence in it throughout the year is prevented by the terms of a covenant, statutory planning consent or similar permission.

Relevant housing associations

10

(1) An option to tax has no effect in relation to any grant made to a relevant housing association in relation to any land if the association certifies that the land is to be used (after any necessary demolition work) for the construction of a building or buildings intended for use—

(a) as a dwelling or number of dwellings, or

(b) solely for a relevant residential purpose.

(2) The association must give the certificate to the person making the grant (“the seller”)—

(a) within the period specified in a public notice, or

(b) if the seller agrees, at any later time before the seller makes a supply to which the grant gives rise.

(3) In this paragraph “relevant housing association” means—

(za) a private registered provider of social housing,

(a) a registered social landlord within the meaning of Part 1 of the Housing Act 1996 (... Welsh registered social landlords),

(b) a registered social landlord within the meaning of the Housing (Scotland) Act 2010 (asp17) which is either—

(i) a society registered under the Co-operative and Community Benefit Societies and Credit Unions Act 1965 (c.12), or

(ii) a company within the meaning of the Companies Act 2006 (c.46), or

(c) a registered housing association within the meaning of Part 2 of the Housing (Northern Ireland) Order 1992 (Northern Irish registered housing associations).

(4) For the purposes of this paragraph the reference to use solely for a relevant residential purpose is to be read without regard to Note (12) of Group 5 of Schedule 8 (which would otherwise apply as a result of paragraph 33 of this Schedule).

(5) The Commissioners may publish a notice for the purposes of this paragraph—

(a) specifying the form in which any certificate under this paragraph must be made, and

(b) specifying any information which any certificate under this paragraph must contain.

Grant to individual for construction of dwelling

11

An option to tax has no effect in relation to any grant made to an individual if—

(a) the land is to be used for the construction of a building intended for use by the individual as a dwelling, and

(b) the construction is not carried out in the course or furtherance of a business carried on by the individual.

Anti-avoidance

Developers of exempt land

12

(1) A supply is not, as a result of an option to tax, a taxable supply if—

(a) the grant giving rise to the supply was made by a person (“the grantor”) who was a developer of the land, and

(b) the exempt land test is met.

(2) The exempt land test is met if, at the time when the grant was made (or treated for the purposes of this paragraph as made), the relevant person intended or expected that the land—

(a) would become exempt land (whether immediately or eventually and whether or not as a result of the grant), or

(b) would continue, for a period at least, to be exempt land.

(3) “The relevant person” means—

(a) the grantor, or

(b) a development financier.

(4) For the meaning of a development financier, see paragraph 14.

(5) For the meaning of “exempt land”, see paragraphs 15 and 16.

(6) If a supply is made by a person other than the person who made the grant giving rise to it—

(a) the person making the supply is treated for the purposes of this paragraph as the person who made the grant giving rise to it, and

(b) the grant is treated for the purposes of this paragraph as made at the time when that person made the first supply arising from the grant.

(7) For a special rule in the case of a grant made on or after 19th March 1997 and before 10th March 1999, see paragraph 17.

(8) Nothing in this paragraph applies in relation to a supply arising from—

(a) a grant made before 26th November 1996, or

(b) a grant made on or after that date but before 30th November 1999, in pursuance of a written agreement entered into before 26th November 1996, on terms which (as terms for which provision was made by that agreement) were fixed before 26th November 1996.

Meaning of grants made by a developer

13

(1) This paragraph applies for the purposes of paragraph 12.

(2) A grant made by any person (“the grantor”) in relation to any land is made by a developer of the land if—

(a) the land is, or was intended or expected to be, a relevant capital item (see sub-paragraphs (3) to (5)), and

(b) the grant is made at an eligible time as respects that capital item (see sub-paragraph (6)).

(3) The land is a relevant capital item if—

(a) the land, or

(b) the building or part of a building on the land,

is a capital item in relation to the grantor.

(4) The land was intended or expected to be a relevant capital item if the grantor, or a development financier, intended or expected that—

(a) the land, or

(b) a building or part of a building on, or to be constructed on, the land,

would become a capital item in relation to the grantor or any relevant transferee.

(5) A person is a relevant transferee if the person is someone to whom the land, building or part of a building was to be transferred—

(a) in the course of a supply, or

(b) in the course of a transfer of a business or part of a business as a going concern.

(6) A grant is made at an eligible time as respects a capital item if it is made before the end of the period provided in the relevant regulations for the making of adjustments relating to the deduction of input tax as respects the capital item.

(7) But if—

(a) a person other than the grantor is treated by paragraph 12(6) as making the grant of the land, and

(b) the grant is consequently treated as made at what would otherwise be an ineligible time,

the grant is treated instead as if were not made at an ineligible time.

(8) In this paragraph a “capital item”, in relation to any person, means an asset falling, in relation to the person, to be treated as a capital item for the purposes of the relevant regulations.

(9) In this paragraph “the relevant regulations”, as respects any item, means regulations under section 26(3) and (4) providing for adjustments relating to the deduction of input tax to be made as respects that item.

Meaning of “development financier”

14

(1) This paragraph explains for the purposes of paragraphs 12 to 17 what is meant, in relation to the grantor of any land, by a development financier.

(2) A “development financier” means a person who—

(a) has provided finance for the grantor’s development of the land, or

(b) has entered into any arrangement to provide finance for the grantor’s development of the land,

with the intention or in the expectation that the land will become exempt land or continue (for a period at least) to be exempt land.

(3) For the purposes of this paragraph references to finance being provided for the grantor’s development of the land are to doing (directly or indirectly) any one or more of the following—

(a) providing funds for meeting the whole or any part of the cost of the grantor’s development of the land,

(b) procuring the provision of such funds by another,

(c) providing funds for discharging (in whole or in part) any liability that has been or may be incurred by any person for or in connection with the raising of funds to meet the cost of the grantor’s development of the land, and

(d) procuring that any such liability is or will be discharged (in whole or in part) by another.

(4) For the purposes of this paragraph references to providing funds for a particular purpose are to—

(a) the making of a loan of funds that are or are to be used for that purpose,

(b) the provision of any guarantee or other security in relation to such a loan,

(c) the provision of any of the consideration for the issue of any shares or other securities issued wholly or partly for raising those funds,

(d) the provision of any consideration for the acquisition by any person of any shares or other securities issued wholly or partly for raising those funds, or

(e) any other transfer of assets or value as a consequence of which any of those funds are made available for that purpose.

(5) For the purposes of this paragraph references to the grantor’s development of the land are to the acquisition by the grantor of the asset which—

(a) consists in the land or a building or part of a building on the land, and

(b) is, or (as the case may be) was intended or expected to be, a relevant capital item in relation to the grantor (within the meaning of paragraph 13).

(6) For this purpose the reference to the acquisition of the asset includes—

(a) its construction or reconstruction, and

(b) the carrying out in relation to it of any other works by reference to which it is, or was intended or expected to be, a relevant capital item (within the meaning of paragraph 13).

(7) In this paragraph “arrangement” means any agreement, arrangement or understanding (whether or not legally enforceable).

Meaning of “exempt land”: basic definition

15

(1) This paragraph explains for the purposes of paragraphs 12 to 17 what is meant by exempt land.

(2) Land is exempt land if, at any time before the end of the relevant adjustment period as respects that land—

(a) a relevant person is in occupation of the land, and

(b) that occupation is not wholly, or substantially wholly, for eligible purposes.

(3) Each of the following is a relevant person—

(a) the grantor,

(b) a person connected with the grantor,

(d) a person connected with a development financier.

(3A) Where a person (“P”) is in occupation of the land at any time before the end of the relevant adjustment period as respects that land, P is treated for the purposes of sub-paragraph (2) as not in occupation of the land at that time if—

(a) the building occupation conditions are met at that time, or

(b) P’s occupation of the land arises solely by reference to any automatic teller machine of P.

(4) The relevant adjustment period as respects any land is the period provided in the relevant regulations (within the meaning of paragraph 13) for the making of adjustments relating to the deduction of input tax as respects the land.

(5) For the purposes of this paragraph any question whether a person’s occupation of any land is “wholly, or substantially wholly,” for eligible purposes is to be decided by reference to criteria specified in a public notice.

Meaning of “exempt land”: the building occupation conditions

15A

(1) For the purposes of paragraph 15(3A), the building occupation conditions are met at any time (“the time in question”) if—

(a) the grant consists of or includes the grant of a relevant interest in a building, and

(b) P does not, at the time in question, occupy—

(i) any part of the land that is not a building, or

(ii) more than the maximum allowable percentage of any relevant building.

(2) For the purposes of sub-paragraph (1)(b)(i) and (ii) occupation by a person connected with P is treated as occupation by P if that occupation is not wholly, or substantially wholly, for eligible purposes.

(3) For the purposes of sub-paragraph (1)(b)(i) occupation by a person of—

(a) land used for the parking of cars or other vehicles, or

(b) land that is within the curtilage of a building,

is disregarded if the occupation is ancillary to the occupation by that person of a building.

(4) In sub-paragraph (1)(b)(ii)—

“the maximum allowable percentage” means—2% where P is the grantor or a person connected with the grantor, and10% where P is a development financier or a person connected with a development financier (but not also the grantor or a person connected with the grantor), and

“relevant building”—means a building any relevant interest in which is included in the grant, other than any part of such a building in which, immediately before the grant, neither the grantor nor any person connected with the grantor held a relevant interest, butdoes not include any building P’s occupation of which arises solely by reference to any automatic teller machine of P.

(5) The way in which occupation by a person of a building is measured for the purposes of sub-paragraph (1)(b)(ii) is to be determined in accordance with conditions specified in a public notice.

(6) In this paragraph “relevant interest”, in relation to a building or part of a building, means any interest in, right over or licence to occupy the building or part.

(6A) Sub-paragraph (5) of paragraph 15 (determination of whether occupation “wholly, or substantially wholly” for eligible purposes to be by reference to criteria in public notice) applies for the purposes of this paragraph.

(7) Sub-paragraphs (4) to (7) of paragraph 18 (meaning of “building”) apply for the purposes of this paragraph.

Meaning of “exempt land”: eligible purposes

16

(1) This paragraph explains what is meant for the purposes of paragraph 15 by a person occupying land for eligible purposes.

(2) A person cannot occupy land at any time for eligible purposes unless the person is a taxable person at that time (but this rule is qualified by sub-paragraphs (5) and (6)).

(3) A taxable person occupies land for eligible purposes so far as the occupation is for the purpose of making creditable supplies (but this rule is qualified by sub-paragraphs (5) to (7)).

(4) “Creditable supplies” means supplies which—

(a) are or are to be made in the course or furtherance of a business carried on by the person, and

(b) are supplies of such a description that the person would be entitled to a credit for any input tax wholly attributable to those supplies.

(5) Any occupation of land by a body to which section 33 applies (local authorities etc) is occupation of the land for eligible purposes so far as the occupation is for purposes other than those of a business carried on by the body.

(6) Any occupation of land by a Government department (within the meaning of section 41) is occupation of the land for eligible purposes.

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) If a person occupying land—

(a) holds the land in order to put it to use for particular purposes, and

(b) does not occupy it for any other purpose,

the person is treated for the purposes of this paragraph, for so long as the conditions in paragraphs (a) and (b) continue to be met, as occupying the land for the purposes for which the person proposes to use it.

(9) If land is in the occupation of a person (“A”) who—

(a) is not a taxable person, but

(b) is a person whose supplies are treated for the purposes of this Act as made by another person (“B”) who is a taxable person,

the land is treated for the purposes of this paragraph as if A and B were a single taxable person.

(10) For the purposes of this paragraph a person occupies land—

(a) whether the person occupies it alone or together with one or more other persons, and

(b) whether the person occupies all of the land or only part of it.

Paragraph 12: grants made on or after 19th March 1997 and before 10th March 1999

17

(1) A grant in relation to land which was made—

(a) on or after 19th March 1997, and

(b) before 10th March 1999,

is treated for the purposes of paragraph 12 as made on 10th March 1999 if, at the time of the grant, the capital item test was met.

(2) The capital item test was met if the person making the grant, or a development financier, intended or expected that—

(a) the land, or

(b) a building or part of a building on, or to be constructed on, the land,

would become a capital item in relation to the grantor or any relevant transferee but it had not become such an item.

(3) For the purposes of that test “capital item” and “relevant transferee” have the meaning given by paragraph 13.

Scope of the option, its duration, notification etc

Scope of the option

18

(1) An option to tax has effect in relation to the particular land specified in the option.

(2) If an option to tax is exercised in relation to—

(a) a building, or

(b) part of a building,

the option has effect in relation to the whole of the building and all the land within its curtilage.

(3) If an option to tax—

(a) is exercised in relation to any land, but

(b) is not exercised by reference to a building or part of a building,

the option is nonetheless taken to have effect in relation to any building which is (or is to be) constructed on the land (as well as in relation to land on which no building is constructed).

(4) For the purposes of this paragraph—

(a) buildings linked internally or by a covered walkway, and

(b) complexes consisting of a number of units grouped around a fully enclosed concourse,

are treated as a single building.

(5) But for those purposes—

(a) buildings which are linked internally are not treated as a single building if the internal link is created after the buildings are completed, and

(b) buildings which are linked by a covered walkway are not treated as a single building if the walkway starts to be constructed after the buildings are completed.

(6) In this paragraph a “building” includes—

(a) an enlarged or extended building,

(b) an annexe to a building, and

(7) In this paragraph “covered walkway” does not include a covered walkway to which the general public has reasonable access.

The day from which the option has effect

19

(1) An option to tax has effect from—

(a) the start of the day on which it is exercised, or

(b) the start of any later day specified in the option.

(2) But if, when an option to tax is exercised, the person exercising the option intends to revoke it in accordance with paragraph 23 (revocation of option: the “cooling off” period), the option is treated for the purposes of this Act as if it had never been exercised.

(3) An option to tax may be revoked in accordance with paragraph 22(2) or (3) and any of paragraphs 23 to 25, but not otherwise.

(4) This paragraph needs to be read with—

(a) paragraph 20 (requirement to notify the option), and

(b) paragraph 29(3) (application for prior permission in the case of an exempt grant before the exercise of an option to tax).

Requirement to notify the option

20

(1) An option to tax has effect only if—

(a) notification of the option is given to the Commissioners within the allowed time, and

(b) that notification is given together with such information as the Commissioners may require.

(2) Notification of an option is given within the allowed time if (and only if) it is given—

(a) before the end of the period of 30 days beginning with the day on which the option was exercised, or

(b) before the end of such longer period beginning with that day as the Commissioners may in any particular case allow.

(3) The Commissioners may publish a notice for the purposes of this paragraph specifying—

(a) the form in which a notification under this paragraph must be made, and

(b) the information which a notification under this paragraph must contain.

(4) Notification of an option to tax does not need to be given under this paragraph if the option is treated as exercised in accordance with paragraph 29(3).

Real estate elections: elections to opt to tax land subsequently acquired

21

(1) A person (E) may make an election (a “real estate election”) for this paragraph to have effect in relation to—

(a) relevant interests in any building or land which E acquires after the election is made, and

(b) relevant interests in any building or land which a person acquires after the election is made at a time when the person is a relevant group member.

(2) If E makes a real estate election—

(a) E is treated for the purposes of this Part of this Schedule as if E had exercised an option to tax in relation to the building or land in which the relevant interest is acquired,

(b) that option is treated for those purposes as if it had been exercised on the day on which the acquisition was made and as if it had effect from the start of that day, and

but this sub-paragraph is subject to sub-paragraphs (3) to (5).

(3) A person (P) is not to be treated as a result of this paragraph as exercising an option to tax in relation to any building or land where at any time—

(a) P, or any person who was a relevant group member at that time, exercises an option to tax in relation to the building (or part of the building) or land apart from this paragraph, and

(b) that option has effect from a time earlier than the time from which an option to tax exercised by P in relation to the building or land would otherwise have been treated as having effect as a result of this paragraph.

(4) A person (P) is not to be treated as a result of this paragraph as exercising an option to tax in relation to any building or land in which a relevant interest is acquired (“the later interest”) if—

(a) the person making the acquisition in question held another relevant interest in that building or land before P makes a real estate election, and

(b) the person making the acquisition in question continues to hold that other relevant interest at the time when the later interest is acquired.

(5) A person is not to be treated as a result of this paragraph as exercising an option to tax in relation to any building or land if—

(a) a relevant interest in the building or land is acquired as mentioned in sub-paragraph (1), and

(b) on the relevant assumptions the case would fall within paragraph 28 (pre-option exempt grants: requirement for prior permission before exercise of option to tax).

(6) The relevant assumptions are that—

(a) the effect of this paragraph is disregarded, and

(b) the day from which the person would want the option to tax to have effect for the purposes of paragraphs 28 or 29(3) is the day on which the relevant interest is acquired.

(7) A real estate election has effect only if—

(a) notification of the election is given to the Commissioners before the end of the period of 30 days beginning with the day on which it was made or such longer period as the Commissioners may in any particular case allow,

(b) the notification is made in a form specified in a public notice, and

(8) The Commissioners may at any time require a person who has made a real estate election to give to the Commissioners information specified in a public notice before the end of—

(a) the period of 30 days beginning with that time, or

(b) such longer period as the Commissioners may in any particular case allow.

(9) If a person (P) does not comply with that requirement—

(a) the Commissioners may revoke the election, and

(b) that revocation has effect in relation to relevant interests in any building or land acquired after the notified time by P or a person who is a relevant group member at the time of acquisition.

“The notified time” means the time specified in a notification given by the Commissioners to P (which may not be before the notification is given).

(10) A real estate election may not be revoked except in accordance with sub-paragraph (9).

(11) If a real estate election made by a person (P) is revoked in accordance with that sub-paragraph, another real estate election may be made at any subsequent time by—

(a) P, or

(b) any person who is a relevant group member at that subsequent time,

but only with the prior permission of the Commissioners.

(12) In this paragraph—

“relevant group member”, in relation to any person (“P”) making a real estate election and any time, means a person who is treated under sections 43A to 43D as a member of the same group as P at that time, and

“relevant interest”, in relation to any building or land, means any interest in, right over or licence to occupy the building or land (or any part of it).

(13) For the purposes of this paragraph, the time at which a relevant interest in any building or land is acquired is—

(a) the time at which a supply is treated as taking place for the purposes of the charge to VAT in respect of the acquisition, or

(b) if there is more than one such time, the earliest of them.

(14) For the purposes of sub-paragraph (13)(a), any order under section 5(3)(c) that would otherwise have the effect that the acquisition in question is to be treated as neither a supply of goods nor a supply of services is to be disregarded.

Real estate elections: supplementary

22

(1) This paragraph applies if, at any time (“the relevant time”), a person (E) makes a real estate election under paragraph 21.

(2) An option to tax exercised in relation to any building or part of any building before the relevant time by—

(a) E, or

(b) any relevant group member,

is treated for the purposes of this Part of this Schedule as if it had been revoked from the relevant time if, at that time, neither E nor any relevant group member has a relevant interest in that building.

(3) An option to tax exercised in relation to any land (otherwise than by reference to any building or part of a building) before the relevant time by—

(a) E, or

(b) any relevant group member,

is treated for the purposes of this Part of this Schedule as if it had been revoked in accordance with sub-paragraph (4) from the relevant time if, at that time, neither E nor any relevant group member has a relevant interest in that land, or E or any relevant group member has a relevant interest in only some of it.

(4) The option is treated for the purposes of this Part of this Schedule as if it had been revoked in relation to—

(a) that land, or

(b) the parts of that land in which neither E nor any relevant group member has a relevant interest at the relevant time,

as the case may be.

(5) Sub-paragraphs (2) and (3) are subject to paragraph 26 (anti-avoidance).

(6) An option to tax (“the original option”) exercised in relation to any land (otherwise than by reference to any building or part of a building) before the relevant time by—

(a) E, or

(b) any relevant group member,

may, in circumstances specified in a public notice, be converted by E into separate options to tax if, at the relevant time, E or any relevant group member has a relevant interest in the land or any part of it.

(7) The original option is converted into separate options to tax different parcels of land comprised in that land or part.

(8) Those separate options to tax are treated for the purposes of this Part of this Schedule—

(a) as if they had been exercised by E, and

(b) as if they had effect from the time from which the original option had effect.

(9) But—

(a) those separate options to tax are treated for the purposes of paragraph 3(2) as if they had effect from the relevant time, and

(b) paragraph 23 (revocation of an option: the “cooling off” period) does not apply to those separate options to tax.

(10) The notification of the election given by E must identify—

(a) the separate options to tax treated as exercised by E as a result of sub-paragraphs (6) to (8), and

(b) the different parcels of land in relation to which those separate options to tax are treated as having effect.

(11) In this paragraph—

(a) any reference to any relevant group member is to a body corporate which is a relevant group member at the relevant time, and

(b) any reference to any relevant group member, in relation to any relevant interest in any building or land (or any part of it), is to any relevant group member regardless of whether it has exercised an option to tax the building or land (or any part of it).

(12) In this paragraph “relevant group member” and “relevant interest”, have the meaning given by paragraph 21.

(13) In this paragraph any reference to a real estate election under paragraph 21 does not include an election which is made under sub-paragraph (11) of that paragraph.

Revocation of option: the “cooling off” period

23

(1) An option to tax any land exercised by any person (“the taxpayer”) may be revoked with effect from the day on which it was exercised if—

(a) the time that has lapsed since the day on which the option had effect is less than 6 months,

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) there is no relevant transfer of a business as a going concern (see sub-paragraph (2)), and

(e) notification of the revocation is given to the Commissioners (see sub-paragraph (3)).

(2) There is no relevant transfer of a business as a going concern if, since the option had effect, no grant in relation to the land has been made which is treated as neither a supply of goods nor a supply of services because—

(a) the supply is a supply of the assets of a business by the taxpayer to a person to whom the business (or part of it) is transferred as a going concern, or

(b) the supply is a supply of assets of a business by a person to the taxpayer to whom the business (or part of it) is so transferred.

(3) The notification of the revocation must—

(a) be made in a form specified in a public notice, and

(b) contain information so specified.

(4) The Commissioners may publish a notice for the purposes of this paragraph providing that a revocation under this paragraph is effective only if—

(a) the conditions specified in the notice are met in relation to the option, or

(b) the taxpayer gets the prior permission of the Commissioners on an application made to them before the end of the 6 month period mentioned above.

(5) A notice under sub-paragraph (4) may—

(a) provide that, in a case falling with paragraph (a) of that sub-paragraph, the taxpayer must certify that the conditions specified under that paragraph are met in relation to the option,

(b) specify the form in which an application under paragraph (b) of that sub-paragraph must be made,

(c) provide that an application under that paragraph must contain a statement by the taxpayer certifying which (if any) of the conditions specified under sub-paragraph (4)(a) are met in relation to the option,

(d) specify other information which an application under sub-paragraph (4)(a) must contain, and

(e) provide that the Commissioners may specify conditions subject to which their permission is given and, if any of those conditions are broken, the Commissioners may treat the revocation as if it had not been made.

Revocation of option: lapse of 6 years since having a relevant interest

24

(1) An option to tax exercised by any person in relation to any building or land is treated for the purposes of this Part of this Schedule as revoked if the person does not have a relevant interest in the building or land throughout any continuous period of 6 years beginning at any time after the option has effect.

(2) The option to tax is treated for the purposes of this Part of this Schedule as revoked from the end of that period.

(3) In this paragraph “a relevant interest in the building or land” means an interest in, right over or licence to occupy the building or land (or any part of it).

(4) This paragraph is subject to paragraph 26 (anti-avoidance).

Revocation of option: lapse of more than 20 years since option had effect

25

(1) An option to tax any land exercised by any person (“the taxpayer”) may be revoked if the time that has lapsed since the day on which the option had effect is more than 20 years and—

(a) at the time when the option is to be revoked the conditions specified in a public notice are met in relation to the option (in which case, see sub-paragraphs (2) to (4)), or

(b) the taxpayer gets the prior permission of the Commissioners (in which case, see the remaining sub-paragraphs).

(2) If the conditions specified in the public notice are met in relation to the option, the revocation has effect only if notification of the revocation is given to the Commissioners.

(3) The notification must—

(a) be made in the specified form,

(b) state the day from which the option is to be revoked (which may not be before the day on which the notification is given),

(c) contain a statement by the taxpayer certifying that, on that day, the conditions specified in the public notice are met in relation to the option, and

(d) contain other information specified in a public notice.

(4) If—

(a) notification of the revocation of an option is given to the Commissioners on the basis that the conditions specified in the public notice were met in relation to the option, but

(b) it is subsequently discovered that those conditions were not met in relation to the option,

the Commissioners may nonetheless treat the option as if it had been validly revoked in accordance with this paragraph.

(5) An application for the prior permission of the Commissioners must—

(a) be made in a form specified in a public notice,

(b) contain a statement by the taxpayer certifying which (if any) of the conditions specified in the public notice under sub-paragraph (1)(a) are met in relation to the option, and

(6) If the taxpayer gets the prior permission of the Commissioners for the revocation of an option, the option is revoked from—

(a) the day on which the Commissioners give their permission, or

(b) such earlier or later day or time as they may specify in their permission.

(7) The Commissioners may specify an earlier day or time only if—

(a) the taxpayer has purported to give a notification of the revocation of the option,

(b) the conditions specified in the public notice are not, in the event, met in relation to the option, and

(8) The Commissioners may specify a day or time under sub-paragraph (6)(b) by reference to the happening of an event or the meeting of a condition.

(9) The Commissioners may specify conditions subject to which their permission is given and, if any of those conditions are broken, they may treat the revocation as if it had not been made.

Revocation of option under paragraph 22(2) or (3) or 24: anti-avoidance

26

(1) Sub-paragraphs (2) and (3) of paragraph 22 (revocation of option to tax where a real estate election is made) do not apply if condition A or B is met.

(2) Paragraph 24 (lapse of option to tax) does not apply if condition A, B or C is met.

(3) Condition A is that—

(a) the opter, or a relevant associate of the opter, disposes of a relevant interest in the building or land before the relevant time, and

(b) at the relevant time, a supply for the purposes of the charge to VAT in respect of the disposal—

(i) is yet to take place, or

(ii) would be yet to take place if one or more conditions (such as the happening of an event or the doing of an act) were to be met.

(4) Condition B is that—

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