Finance Act 2003 (c. 14)

(The document as of February, 2008)

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(2) The amount of VAT which a person is liable to pay by virtue of this Schedule on any qualifying supply is to be determined in accordance with sub-paragraphs (3) and (4) below.

(3) If the qualifying supply is treated as made in the United Kingdom, the amount is the amount of VAT that would have been charged on the supply under this Act if the person had been registered under this Act when he made the supply.

(4) If the qualifying supply is treated as made in another member State, the amount is the amount of VAT that would have been charged on the supply in accordance with the law of that member State if the person had been identified for the purposes of VAT in that member State when he made the supply.

(5) Where a person is liable to pay VAT by virtue of this Schedule--

(a) any amount falling to be determined in accordance with sub-paragraph (3) above is to be regarded for the purposes of this Act as VAT charged in accordance with this Act, and

(b) any amount falling to be determined in accordance with sub-paragraph (4) above in relation to another member State is to be regarded for those purposes as VAT charged in accordance with the law of that member State.

Obligation to submit special accounting returns

11 (1) A person who is, or has been, registered under this Schedule must submit a return (a "special accounting return") to the Controller for each reporting period.

(2) Each quarter for the whole or any part of which a person is registered under this Schedule is a "reporting period" in the case of that person.

(3) The special accounting return must state the person's registration number.

(4) For each member State in which the person is treated as having made qualifying supplies for the reporting period, the special accounting return must specify--

(a) the total value of his qualifying supplies treated as made in that member State in that period, apart from the VAT which he is liable to pay by virtue of this Schedule in respect of those supplies,

(b) the rate of VAT applicable to those supplies by virtue of sub-paragraph (3) or (4) (as the case may be) of paragraph 10 above, and

(5) The special accounting return must state the total amount of VAT which the person is liable to pay by virtue of this Schedule in respect of all qualifying supplies treated as made by him in all member States in the reporting period.

(6) If a person is registered under this Schedule for part only of a reporting period, references in this paragraph to his qualifying supplies in that period are references to his qualifying supplies in that part of that period.

(7) In this Schedule, "the Controller" means the Controller, Customs and Excise Value Added Tax Central Unit.

Further obligations with respect to special accounting returns

12 (1) A special accounting return must set out in sterling the amounts referred to in paragraph 11 above.

(2) Any conversion from one currency into another for the purposes of sub-paragraph (1) above shall be made by using the exchange rates published by the European Central Bank--

(a) for the last day of the reporting period to which the special accounting return relates, or

(b) if no such rate is published for that day, for the next day for which such a rate is published.

(3) A special accounting return must be submitted to the Controller within the period of 20 days after the last day of the reporting period to which it relates.

(4) A special accounting return must be submitted by such electronic means, and in such manner, as the Commissioners may direct or may by regulations prescribe.

Payment of VAT

13 (1) A person who is required to submit a special accounting return must, at the same time as he submits the return, pay to the Controller in sterling the amount referred to in paragraph 11(5) above in respect of the reporting period to which the return relates.

(2) A payment under this paragraph must be made in such manner as the Commissioners may direct or may by regulations prescribe.

Obligations to keep and produce records

14 (1) A person must keep records of the transactions which he enters into for the purposes of, or in connection with, qualifying supplies made by him at any time when he is registered under this Schedule.

(2) The records to be kept must be such as will enable the tax authorities for the member State in which a qualifying supply is treated as made to determine whether any special accounting return which is submitted in respect of that supply is correct.

(3) Any records required to be kept must be made available--

(a) to the tax authorities for the member State in which the qualifying supply to which the records relate was treated as made, if they so request, or

(b) to the Commissioners, if they so request.

(4) Records must be made available electronically under sub-paragraph (3) above.

(5) The records relating to a transaction must be maintained for a period of ten years beginning with the 1st January following the date on which the transaction was entered into.

Commissioners' power to request production of records

15 (1) The Commissioners may request a person to make available to them electronically records of the transactions entered into by him for the purposes of, or in connection with, qualifying supplies to which this paragraph applies.

(2) This paragraph applies to qualifying supplies which--

(a) are treated as made in the United Kingdom, and

(b) are made by the person while he is identified under any provision of the law of another member State which implements Article 26c.

Part 3 Understatements and overstatements of UK VAT

Understatement or overstatement of UK VAT in special scheme return

16 (1) If the Commissioners consider that a person who is or has been a participant in the special scheme has submitted a special scheme return which understates his liability to UK VAT, they may give him a notice--

(a) identifying the return in which they consider that the understatement was made,

(b) specifying the amount by which they consider that the person's liability to UK VAT has been understated, and

(c) requesting him to pay that amount to the Controller within the period of 30 days beginning with the date on which the notice is given.

(2) If the Commissioners consider that a person who is or has been a participant in the special scheme has submitted a special scheme return which overstates his liability to UK VAT, they may give him a notice--

(a) identifying the return in which they consider that the overstatement was made, and

(b) specifying the amount by which they consider that the person's liability to UK VAT has been overstated.

(3) Where the Commissioners give a person a notice under sub-paragraph (2) above, they are liable to pay him the amount specified in the notice.

(4) No notice under this paragraph may be given more than 3 years after the end of the period for which the special scheme return in question was made.

(5) In this Schedule, "participant in the special scheme" means a person who--

(a) is registered under this Schedule, or

(b) is identified under any provision of the law of another member State which implements Article 26c.

(6) In this paragraph--

"special scheme return" means--
(a)
a special accounting return; or
(b)
a value added tax return submitted to the tax authorities of another member State;
"UK VAT" means VAT which a person is liable to pay (whether in the United Kingdom or another member State) in respect of qualifying supplies treated as made in the United Kingdom at a time when he is or was a participant in the special scheme;
"value added tax return", in relation to another 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 26c(B)(5) of the 1977 VAT Directive.

Part 4 Application of provisions relating to VAT

Registration under this Act

17 Notwithstanding any provision in this Act to the contrary, a participant in the special scheme is not required to be registered under this Act by virtue of making qualifying supplies.

De-registration

18 Where a person who is registered under Schedule 1 satisfies the Commissioners that he intends to apply for--

(a) registration under this Schedule, or

(b) identification under any provision of the law of another member State which implements Article 26c,

they may, if he so requests, cancel his registration under Schedule 1 with effect from the day on which the request is made or from such later date as may be agreed between him and the Commissioners.

VAT representatives

19 Section 48(1) (VAT representatives) does not permit the Commissioners to direct a participant in the special scheme to appoint a VAT representative.

Appeals

20 (1) An appeal shall lie to a tribunal with respect to any of the following--

(a) the registration or cancellation of the registration of any person under this Schedule;

(b) a decision of the Commissioners to give a notice under sub-paragraph (1) of paragraph 16 above;

(2) Part 5 (appeals), and any orders or regulations under that Part, have effect in relation to an appeal under this paragraph as if it were an appeal under section 83 (but not under any particular paragraph of that section).

Payments on account of non-UK VAT to other member States

21 (1) Neither--

(a) paragraph 1(2) of Schedule 11, nor

(b) section 10 of the Exchequer and Audit Departments Act 1866,

applies to money or securities for money collected or received for or on account of VAT if required to be paid to another member State by virtue of the VAT Co-operation Regulation.

(2) In sub-paragraph (1) above, "the VAT Co-operation Regulation" means the Council Regulation of 27 January 1992 on administrative co-operation in the field of indirect taxation (VAT) (218/92/EEC), as amended by the Council Regulation of 7 May 2002 (792/2002/EC) (which temporarily amends the VAT Co-operation Regulation as regards additional measures regarding electronic commerce).

Refund of UK VAT

22 (1) The provisions which give effect to the 1986 VAT Refund Directive in the United Kingdom have effect in relation to a participant in the special scheme, but with the following modifications.

(2) The provision which gives effect to Article 2(1) of the 1986 VAT Refund Directive (as at 9th April 2003, see regulation 186 of the Value Added Tax Regulations 1995) shall apply in relation to a participant in the special scheme, but only so as to entitle him to a refund of VAT charged on--

(a) goods imported by him into the United Kingdom, and

(b) supplies made to him in the United Kingdom,

in connection with the making by him of qualifying supplies while he is a participant in the special scheme.

(3) The following provisions shall be omitted.

(4) The first provision is that which gives effect to Article 1(1) of the 1986 VAT Refund Directive, so far as it requires a member State to prevent a person who is deemed to have supplied services in that member State during a period from being granted a refund of VAT for that period (as at 9th April 2003, see regulation 188(2)(b) of the Value Added Tax Regulations 1995).

(5) The second provision is that which gives effect to Article 2(2) of the 1986 VAT Refund Directive (which permits member States to make refunds conditional upon the granting by third States of comparable advantages regarding turnover taxes: as at 9th April 2003, see regulation 188(1) of the Value Added Tax Regulations 1995).

(6) The third provision is that which gives effect to Article 2(3) of the 1986 VAT Refund Directive (which permits member States to require the appointment of a tax representative: as at 9th April 2003, see regulation 187 of the Value Added Tax Regulations 1995).

(7) The fourth provision is that which gives effect to Article 4(2) of the 1986 VAT Refund Directive (which permits member States to provide for the exclusion of certain expenditure and to make refunds subject to additional conditions).

(8) In this paragraph "the 1986 VAT Refund Directive" means the Thirteenth Council Directive of 17th November 1986 on the harmonisation of the laws of the member States relating to turnover taxes – arrangements for the refund of value added tax to taxable persons not established in Community territory (86/560/EEC).

Part 5 Supplementary

Interpretation

23 (1) In this Schedule--

"the 1977 VAT Directive" means the Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the member States relating to turnover taxes – common system of value added tax: uniform basis of assessment (77/388/EEC);
"the 2002 VAT Directive" means the Council Directive of 7 May 2002 amending and amending temporarily the 1977 VAT Directive as regards the value added tax arrangements applicable to radio and television broadcasting services and certain electronically supplied services (2002/38/EC);
"Article 26c" has the meaning given by paragraph 2(7) above;
"the Controller" has the meaning given by paragraph 11(7) above;
"participant in the special scheme" has the meaning given by paragraph 16(5) above;
"qualifying supply" has the meaning given by paragraph 3 above;
"registration number" means the number allocated to a person on his registration under this Schedule in accordance with paragraph 6(a) above;
"registration request" is to be construed in accordance with paragraph 4(1)(b) above;
"reporting period" is to be construed in accordance with paragraph 11(2) above;
"special accounting return" is to be construed in accordance with paragraph 11(1) above.

(2) References in this Schedule to a qualifying supply being "treated as made" in a member State are references to its being treated as made--

(a) in the United Kingdom, by virtue of any provision which gives effect in the United Kingdom to Article 9(2)(f) of the 1977 VAT Directive (which is inserted by Article 1(1)(b) of the 2002 VAT Directive), or

(b) in another member State, by virtue of any provision of the law of that member State which gives effect to that Article.

(3) The provision which, as at 9th April 2003, is to give effect in the United Kingdom to Article 9(2)(f) of the 1977 VAT Directive (as mentioned in sub-paragraph (2)(a) above) is article 16A of the Value Added Tax (Place of Supply of Services) Order 1992 (which is prospectively inserted by article 3 of the Value Added Tax (Place of Supply of Services) (Amendment) Order 2003). " .

Section 49

SCHEDULE 3 Stamp duty land tax: transactions exempt from charge

No chargeable consideration

1 A land transaction is exempt from charge if there is no chargeable consideration for the transaction.

Grant of certain leases by registered social landlords

2 (1) The grant of a lease of a dwelling is exempt from charge if the lease--

(a) is granted by a registered social landlord to one or more individuals in accordance with arrangements to which this paragraph applies, and

(b) is for an indefinite term or is terminable by notice of a month or less.

(2) This paragraph applies to arrangements between a registered social landlord and a housing authority under which the landlord provides, for individuals nominated by the authority in pursuance of its statutory housing functions, temporary rented accommodation which the landlord itself has obtained on a short-term basis.

The reference above to accommodation obtained by the landlord "on a short-term basis" is to accommodation leased to the landlord for a term of five years or less.

(3) A "housing authority" means--

(a) in relation to England and Wales--

(i) a principal council within the meaning of the Local Government Act 1972 (c. 70), or

(ii) the Common Council of the City of London;

(b) in relation to Scotland, a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994 (c. 39);

(i) the Department for Social Development in Northern Ireland, or

(ii) the Northern Ireland Housing Executive.

Transactions in connection with divorce etc

3 A transaction between one party to a marriage and the other is exempt from charge if it is effected--

(a) in pursuance of an order of a court made on granting in respect of the parties a decree of divorce, nullity of marriage or judicial separation;

(b) in pursuance of an order of a court made in connection with the dissolution or annulment of the marriage, or the parties' judicial separation, at any time after the granting of such a decree;

(i) an order of a court made at any time under section 22A, 23A or 24A of the Matrimonial Causes Act 1973 (c. 18), or

(ii) an incidental order of a court made under section 8(2) of the Family Law (Scotland) Act 1985 (c. 37) by virtue of section 14(1) of that Act;

(d) at any time in pursuance of an agreement of the parties made in contemplation or otherwise in connection with the dissolution or annulment of the marriage, their judicial separation or the making of a separation order in respect of them.

Variation of testamentary dispositions etc

4 (1) A transaction following a person's death that varies a disposition (whether effected by will, under the law relating to intestacy or otherwise) of property of which the deceased was competent to dispose is exempt from charge if the following conditions are met.

(2) The conditions are--

(a) that the transaction is carried out within the period of two years after a person's death, and

(b) that no consideration in money or money's worth other than the making of a variation of another such disposition is given for it.

(3) This paragraph applies whether or not the administration of the estate is complete or the property has been distributed in accordance with the original dispositions.

Power to add further exemptions

5 (1) The Treasury may by regulations provide that any description of land transaction specified in the regulations is exempt from charge.

(2) The regulations may contain such supplementary, incidental and transitional provision as appears to the Treasury to be appropriate.

Section 50

SCHEDULE 4 Stamp duty land tax: chargeable consideration

Money or money's worth

1 (1) The chargeable consideration for a transaction is, except as otherwise expressly provided, any consideration in money or money's worth given for the subject-matter of the transaction, directly or indirectly, by the purchaser or a person connected with him.

(2) Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of sub-paragraph (1).

Value added tax

2 The chargeable consideration for a transaction shall be taken to include any value added tax chargeable in respect of the transaction, other than value added tax chargeable by virtue of an election under paragraph 2 of Schedule 10 to the Value Added Tax Act 1994 (c. 23) made after the effective date of the transaction.

Postponed consideration

3 The amount or value of the chargeable consideration for a transaction shall be determined without any discount for postponement of the right to receive it or any part of it.

Just and reasonable apportionment

4 (1) For the purposes of this Part consideration attributable--

(a) to two or more land transactions, or

(b) in part to a land transaction and in part to another matter, or

shall be apportioned on a just and reasonable basis.

(2) If the consideration is not so apportioned, this Part has effect as if it had been so apportioned.

(3) For the purposes of this paragraph any consideration given for what is in substance one bargain shall be treated as attributable to all the elements of the bargain, even though--

(a) separate consideration is, or purports to be, given for different elements of the bargain, or

(b) there are, or purport to be, separate transactions in respect of different elements of the bargain.

Exchanges

5 (1) This paragraph applies to determine the chargeable consideration where one or more land transactions are entered into by a person as purchaser (alone or jointly) wholly or partly in consideration of one or more other land transactions being entered into by him (alone or jointly) as vendor.

(2) In this paragraph--

(a) "relevant transaction" means any of those transactions, and

(b) "relevant acquisition" means a relevant transaction entered into as purchaser and "relevant disposal" means a relevant transaction entered into as vendor.

(3) The following rules apply if the subject-matter of any of the relevant transactions is a major interest in land--

(a) where a single relevant acquisition is made, the chargeable consideration for the acquisition is--

(i) the market value of the subject-matter of the acquisition, and

(ii) if the acquisition is the grant of a lease at a rent, that rent;

(b) where two or more relevant acquisitions are made, the chargeable consideration for each relevant acquisition is--

(i) the market value of the subject-matter of that acquisition, and

(ii) if the acquisition is the grant of a lease at a rent, that rent.

(4) The following rules apply if the subject-matter of none of the relevant transactions is a major interest in land--

(a) where a single relevant acquisition is made in consideration of one or more relevant disposals, the chargeable consideration for the acquisition is the amount or value of any chargeable consideration other than the disposal or disposals that is given for the acquisition;

(b) where two or more relevant acquisitions are made in consideration of one or more relevant disposals, the chargeable consideration for each relevant acquisition is the appropriate proportion of the amount or value of any chargeable consideration other than the disposal or disposals that is given for the acquisitions.

(5) For the purposes of sub-paragraph (4)(b) the appropriate proportion is--

---

where--

MV is the market value of the subject-matter of the acquisition for which the chargeable consideration is being determined, and
TMV is the total market value of the subject-matter of all the relevant acquisitions.

(6) This paragraph has effect subject to--

paragraph 6 of this Schedule (partition etc: disregard of existing interest), and
section 58 (relief for certain exchanges of residential property).

Partition etc: disregard of existing interest

6 In the case of a land transaction giving effect to a partition or division of a chargeable interest to which persons are jointly entitled, the share of the interest held by the purchaser immediately before the partition or division does not count as chargeable consideration.

Valuation of non-monetary consideration

7 Except as otherwise expressly provided, the value of any chargeable consideration for a land transaction, other than--

(a) money (whether in sterling or another currency), or

(b) debt as defined for the purposes of paragraph 8 (debt as consideration),

shall be taken to be its market value at the effective date of the transaction.

Debt as consideration

8 (1) Where the chargeable consideration for a land transaction consists in whole or in part of--

(a) the satisfaction or release of debt due to the purchaser or owed by the vendor, or

(b) the assumption of existing debt by the purchaser,

the amount of debt satisfied, released or assumed shall be taken to be the whole or, as the case may be, part of the chargeable consideration for the transaction.

(2) If the effect of sub-paragraph (1) would be that the amount of the chargeable consideration for the transaction exceeded the market value of the subject-matter of the transaction, the amount of the chargeable consideration is treated as limited to that value.

(3) In this paragraph--

(a) "debt" means an obligation, whether certain or contingent, to pay a sum of money either immediately or at a future date,

(b) "existing debt", in relation to a transaction, means debt created or arising before the effective date of, and otherwise than in connection with, the transaction, and

(c) references to the amount of a debt are to the principal amount payable or, as the case may be, the total of the principal amounts payable, together with the amount of any interest that has accrued due on or before the effective date of the transaction.

Conversion of amounts in foreign currency

9 (1) References in this Part to the amount or value of the consideration for a transaction are to its amount or value in sterling.

(2) For the purposes of this Part the sterling equivalent of an amount expressed in another currency shall be ascertained by reference to the London closing exchange rate on the effective date of the transaction (unless the parties have used a different rate for the purposes of the transaction).

Carrying out of works

10 (1) Where the whole or part of the consideration for a land transaction consists of the carrying out of works of construction, improvement or repair of a building or other works to enhance the value of land, then--

(a) to the extent that the conditions specified in sub-paragraph (2) are met, the value of the works does not count as chargeable consideration, and

(b) to the extent that those conditions are not met, the value of the works shall be taken into account as chargeable consideration.

(2) The conditions referred to in sub-paragraph (1) are--

(a) that the works are carried out after the effective date of the transaction,

(b) that the works are carried out on land acquired or to be acquired under the transaction or on other land held by the purchaser or a person connected with him, and

(c) that it is not a condition of the transaction that the works are carried out by the vendor or a person connected with him.

(3) In this paragraph--

(a) references to the acquisition of land are to the acquisition of a major interest in it;

(b) the value of the works shall be taken to be the amount that would have to be paid in the open market for the carrying out of the works in question.

(4) Section 839 of the Taxes Act 1988 (connected persons) has effect for the purposes of this paragraph.

Provision of services

11 Where the whole or part of the consideration for a land transaction consists of the provision of services (other than the carrying out of works to which paragraph 10 applies), the value of that consideration shall be taken to be the amount that would have to be paid in the open market to obtain those services.

Land transaction entered into by reason of employment

12 (1) Where a land transaction is entered into by reason of the purchaser's employment, or that of a person connected with him, then--

(a) if the transaction gives rise to a charge to tax under Chapter 5 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (taxable benefits: living accommodation) and--

(i) no rent is payable by the purchaser, or

(ii) the rent payable by the purchaser is less than the cash equivalent of the benefit calculated under section 105 or 106 of that Act,

there shall be taken to be payable by the purchaser as rent an amount equal to the cash equivalent chargeable under those sections;

(b) if the transaction would give rise to a charge under that Chapter but for section 99 of that Act (accommodation provided for performance of duties), the consideration for the transaction is the actual consideration (if any);

(c) if neither paragraph (a) nor paragraph (b) applies, the consideration for the transaction shall be taken to be not less than the market value of the subject-matter of the transaction as at the effective date of the transaction.

(2) Section 839 of the Taxes Act 1988 (connected persons) has effect for the purposes of this paragraph.

Obligations under lease

13 (1) In the case of the grant of a lease none of the following counts as chargeable consideration--

(a) any undertaking by the tenant to repair, maintain or insure the demised premises (in Scotland, the leased premises);

(b) any undertaking by the tenant to pay any amount in respect of services, repairs, maintenance or insurance or the landlord's costs of management;

(c) any other obligation undertaken by the tenant that is not such as to affect the rent that a tenant would be prepared to pay in the open market;

(d) any guarantee of the payment of rent or the performance of any other obligation of the tenant under the lease;

(e) any penal rent, or increased rent in the nature of a penal rent, payable in respect of the breach of any obligation of the tenant under the lease.

(2) Where sub-paragraph (1) applies in relation to an obligation, a payment made in discharge of the obligation does not count as chargeable consideration.

(3) The assumption or (as the case may be) release of any such obligation as is mentioned in sub-paragraph (1) does not count as chargeable consideration in relation to the assignment or surrender of the lease.

Surrender of existing lease in return for new lease

14 (1) This paragraph applies where a lease is granted in consideration of the surrender of an existing lease--

(a) of the same or substantially the same premises,

(b) of which the unexpired term is substantially the same as the term of the new lease, and

(2) Where this paragraph applies--

(a) the grant of the new lease does not count as chargeable consideration for the surrender, and

(b) the surrender does not count as chargeable consideration for the grant of the new lease.

Reverse premium

15 (1) In the case of the grant, assignment or surrender of a lease a reverse premium does not count as chargeable consideration.

(2) A "reverse premium" means--

(a) in relation to the grant of a lease, a premium moving from the landlord to the tenant;

(b) in relation to the assignment of a lease, a premium moving from the assignor to the assignee;

Indemnity given by purchaser

16 Where the purchaser agrees to indemnify the vendor in respect of liability to a third party arising from breach of an obligation owed by the vendor in relation to the land that is the subject of the transaction, neither the agreement nor any payment made in pursuance of it counts as chargeable consideration.

Section 56

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