Office of Public Sector Information
SCHEDULE 3 continued
4 (1) This paragraph has effect where rent is payable in consideration of the grant of an interest in, right over, or licence to occupy any building or land to which an election under paragraph 2 above relates (or any part of any such building or land).
(2) If—
(a) the rent relates to a period beginning before and ending on or after the first day for which the election has effect; and
(b) the grant for which the rent is consideration would, apart from this sub-paragraph, take place before that day,
the grant shall be treated as taking place on that day to the extent that it is made for rent relating to the part of the period falling on or after that day.
(3) If—
(a) the rent relates to a period beginning on or after the first day for which the election has effect; and
(b) the grant for which the rent is consideration would, apart from this sub-paragraph, take place before that day,
the grant shall be treated as taking place on the first day of the period to which the rent relates.
(4) If—
(a) the rent relates to a period beginning before the first day for which the election has effect; and
(b) the grant for which the rent is consideration takes place on or after that day,
tax shall not be chargeable on the grant by virtue of paragraph 2 above to the extent that it is made for rent relating to any time before that day.
(5) Where the rent is payable by a person in relation to a period when he is in occupation of a building completed before 1st August 1989 (or part of such a building) or land of which he was in occupation immediately before that date, any tax which would be chargeable by virtue of paragraph 2 above on the grant for which the rent is consideration—
(a) except in the case of a charity, shall be chargeable as if the consideration were reduced by 50 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1989 and ending on 31st July 1990; and
(b) in the case of a charity—
(i) shall be chargeable as if the consideration were reduced by 80 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1989 and ending on 31st July 1990;
(ii) shall be chargeable as if the consideration were reduced by 60 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1990 and ending on 31st July 1991;
(iii) shall be chargeable as if the consideration were reduced by 40 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1991 and ending on 31st July 1992; and
(iv) shall be chargeable as if the consideration were reduced by 20 per cent. if and to the extent that the rent relates to or to any part of the year beginning on 1st August 1992 and ending on 31st July 1993.
5 (1) Paragraph 6 below shall apply on the first occasion during the period beginning with the day when the construction of a building or work within sub-paragraph (2) below is first planned and ending ten years after the completion of the building or work on which a person who is a developer in relation to the building or work—
(a) grants an interest in, right over or licence to occupy the building or work (or any part of it) which is an exempt supply; or
(b) is in occupation of the building, or uses the work, (or any part of it) when not a fully taxable person (or, if a person treated under section 29 of this Act as a member of a group, when the representative member is not a fully taxable person).
(2) Subject to sub-paragraph (3) below, the buildings and works within this sub-paragraph are—
(a) any building neither designed as a dwelling or number of dwellings nor intended for use solely for a relevant residential purpose or a relevant charitable purpose; and
(b) any civil engineering work, other than a work necessary for the development of a permanent park for residential caravans.
(3) A building or work is not within sub-paragraph (2) above if—
(a) construction of it was commenced before 1st August 1989; or
(b) a grant of the fee simple in it which falls within paragraph (a) (ii) or (iv) of item 1 of Group 1 of Schedule 6 to this Act has been made before the occasion concerned.
(4) For the purposes of this paragraph a taxable person is, in relation to any building or work, a fully taxable person throughout a prescribed accounting period if—
(a) at the end of that period he is entitled to credit for input tax on all supplies to, and importations by, him in the period (apart from any on which input tax is excluded from credit by virtue of section 14(10) of this Act); or
(b) the building or work is not used by him at any time during the period in, or in connection with, making any exempt supplies of goods or services.
(5) Subject to sub-paragraph (6) below, in this paragraph and paragraph 6 below “developer”, in relation to a building or work, means any person who—
(a) constructs it;
(b) orders it to be constructed; or
(c) finances its construction,
with a view to granting an interest in, right over or licence to occupy it (or any part of it) or to occupying or using it (or any part of it) for his own purposes.
(6) Where—
(a) a body corporate treated under section 29 of this Act as a member of a group is a developer in relation to a building or work; and
(b) it grants an interest in, right over or licence to occupy the building or work (or any part of it) to another body corporate which is treated under that section as a member of the group,
then, for the purposes of this paragraph and paragraph 6 below, as from the time of the grant any body corporate such as is mentioned in sub-paragraph (7) below shall be treated as also being a developer in relation to the building or work.
(7) The bodies corporate referred to in sub-paragraph (6) above are any which under section 29 of this Act—
(a) was treated as a member of the same group as the body corporate making the grant at the time of the grant;
(b) has been so treated at any later time when the body corporate by which the grant was made had an interest in, right over or licence to occupy the building or work (or any part of it); or
(c) has been treated as a member of the same group as a body corporate within paragraph (a) or (b) above or this paragraph at a time when that body corporate had an interest in, right over or licence to occupy the building or work (or any part of it).
6 (1) Where this paragraph applies the interest in, right over or licence to occupy the building or work (or any part of it) held by the developer shall be treated for the purposes of this Act as supplied to the developer for the purpose of a business carried on by him and supplied by him in the course or furtherance of the business on the last day of the prescribed accounting period during which it applies or, if later, of the prescribed accounting period during which the building or work becomes substantially ready for occupation or use.
(2) The supply treated as made by sub-paragraph (1) above shall be taken to be a taxable supply and the value of the supply shall be the aggregate of—
(a) the value of grants relating to the land on which the building or work is constructed made or to be made to the developer, other than any grants to be made for consideration in the form of rent the value of which cannot be ascertained by the developer when the supply is treated as made; and
(b) the value of all the taxable supplies of goods and services, other than any that are zero-rated, made or to be made for or in connection with the construction of the building or work.
(3) Where the value of a supply which, apart from this sub-paragraph, would be treated as made by sub-paragraph (1) above would be less than £100,000, no supply shall be treated as made by that sub-paragraph.
7 Where the benefit of the consideration for the grant of an interest in, right over or licence to occupy land accrues to a person but that person is not the person making the grant—
(a) the person to whom the benefit accrues shall for the purposes of this Act be treated as the person making the grant; and
(b) to the extent that any input tax of the person actually making the grant is attributable to the grant it shall be treated as input tax of the person to whom the benefit accrues.
8 The Notes to Group 8 of Schedule 5 to this Act and Group 1 of Schedule 6 to this Act apply in relation to this Schedule as they apply in relation to their respective Groups but subject to any appropriate modifications.”
7 In section 42 (adjustment of consideration on changes in tax) of the [1983 c. 55.] Value Added Tax Act 1983—
(a) the following subsection shall be inserted after subsection (1)—
“(1A) Subsection (1) above shall apply in relation to a tenancy or lease as it applies in relation to a contract except that a term of a tenancy or lease shall not be taken to provide that the rule contained in that subsection is not to apply in the case of the tenancy or lease if the term does not refer specifically to value added tax or this section.”, and
(b) in subsection (2), the words “(including a change attributable to the making of an election under paragraph 2 of Schedule 6A to this Act)” shall be added at the end.
8 In section 45(4) (orders etc.) of the [1983 c. 55.] Value Added Tax Act 1983, there shall be added after paragraph (c)—
“(d) an order under section 35A above, except one making only such amendments as are necessary or expedient in consequence of provisions of an order under this Act which—
(i) vary Schedule 5 or Schedule 6 to this Act; but
(ii) are not within paragraph (c) above.”
9 In section 48 (interpretation) of the Value Added Tax Act 1983, after the definition of “Commissioners” there shall be inserted—
““fee simple”—
in relation to Scotland, means the estate or interest of the proprietor of the dominium utile or, in the case of land not held on feudal tenure, the estate or interest of the owner;
in relation to Northern Ireland, includes the estate of a person who holds land under a fee farm grant;”.
10 In Schedule 1 (registration) to the Value Added Tax Act 1983—
(a) in paragraph 1 there shall be added at the end—
“(6) Where, apart from this sub-paragraph, an interest in, right over or licence to occupy any land would under sub-paragraph (5) above be disregarded for the purposes of sub-paragraph (1) above, it shall not be if it is supplied on a taxable supply which is not zero-rated.”, and
(b) in paragraph 2 there shall be added at the end—
“(4) Where, apart from this sub-paragraph, an interest in, right over or licence to occupy any land would under sub-paragraph (3) above be disregarded for the purposes of sub-paragraph (1) above, it shall not be if it is supplied on a taxable supply which is not zero-rated.”
11 In Schedule 2 (supplies of goods and services) to the Value Added Tax Act 1983—
(a) in paragraph 4, for the word “granting” there shall be substituted the word “grant”,
(b) in paragraph 5(1), for the words “the goods” there shall be substituted the word “goods”, and
(c) there shall be added at the end—
“8 (1) Subject to sub-paragraphs (2) and (3) below, paragraphs 5 to 7 above have effect in relation to land forming part of the assets of, or held or used for the purposes of, a business as if it were goods forming part of the assets of, or held or used for the purposes of, a business.
(2) In the application of those paragraphs by virtue of sub-paragraph (1) above, references to transfer, disposition or sale shall have effect as references to the grant or assignment of any interest in, right over or licence to occupy the land concerned.
(3) Except in relation to—
(a) the grant or assignment of a major interest; or
(b) a grant or assignment otherwise than for a consideration,
in the application of paragraph 5(1) above by virtue of sub-paragraph (1) above the reference to a supply of goods shall have effect as a reference to a supply of services.”
12 (1) Subject to sub-paragraphs (2) and (3) and paragraph 13 below, the amendments made by paragraphs 1 to 4 of this Schedule shall have effect in relation to grants, assignments and other supplies made on or after 1st April 1989.
(2) Note 4(b) to Group 8 of Schedule 5 to the [1983 c. 55.] Value Added Tax Act 1983 shall have effect in relation to grants, assignments and other supplies made on or after 1st August 1989.
(3) In relation to grants and assignments made on or after 1st April 1989 but before 1st August 1989—
(a) that Group shall have effect as if the Notes to it included a Note in the same terms as Note (1) to that Group as it had effect before the substitution made by paragraph 1 above, and
(b) Group 8A of that Schedule shall have effect as if the Notes to it included a Note in the same terms as Note (5) to that Group as it had effect before the amendments made by paragraph 2 above.
(4) Paragraphs 5, 7, 8, 11 and 13(6) and (7) of this Schedule and paragraph 6, so far as relating to section 35A(2) of, and paragraphs 2 to 7 of Schedule 6A to, the Value Added Tax Act 1983, shall come into force on 1st August 1989.
(5) Subject to the preceding provisions of this paragraph, this Schedule shall come into force on 1st April 1989.
13 (1) Subject to sub-paragraph (3) below, the amendments made by paragraphs 1 and 2 of this Schedule shall not have effect in relation to a grant, assignment or other supply where—
(a) it is made in pursuance of a legally binding obligation to make it which was incurred before 21st June 1988, and
(b) if the Commissioners so require (whether before or after it is made), it is proved to their satisfaction by the production of documents made before that date that it is so made.
(2) Subject to sub-paragraph (3) below, the amendments made by paragraphs 1 and 2 of this Schedule shall not have effect in relation to a grant or assignment of an interest in, or in any part of, a building or its site where—
(a) the grant or assignment takes place before 21st June 1993,
(b) the person making the grant or assignment was under a legally binding obligation incurred before 21st June 1988 to construct (or reconstruct) the building or to construct any development of which it forms part (other than an obligation to receive services or goods in the course of the construction or reconstruction),
(c) if the Commissioners so require (whether before or after the grant or assignment is made), it is proved to their satisfaction by the production of documents made before that date that he was under that obligation, and
(d) planning permission for the construction (or reconstruction) of the building was granted before 21st June 1988.
(3) Where the grant or assignment is of a tenancy or lease—
(a) if a premium is payable, sub-paragraph (1) or (2) above shall apply only to the extent that it is made for consideration in the form of the premium; and
(b) if a premium is not payable, sub-paragraph (1) or (2) above shall apply only to the extent that it is made for consideration in the form of the first payment of rent due under the tenancy or lease.
(4) The amendments made by paragraphs 1 and 2 of this Schedule shall not have effect in relation to a supply relating to a building or civil engineering work where—
(a) the supply takes place before 21st June 1993,
(b) the supply is made to the person constructing the building or work (or reconstructing the building),
(c) that person was under a legally binding obligation incurred before 21st June 1988 to construct the building or work (or to reconstruct the building) or to construct any development of which it forms part (other than an obligation to receive services or goods in the course of the construction or reconstruction),
(d) if the Commissioners so require (whether before or after the supply is made), it is proved to their satisfaction by the production of documents made before that date that he was under that obligation,
(e) planning permission for the construction of the building or work (or the reconstruction of the building) was granted before 21st June 1988, and
(f) before the supply takes place the person constructing the building or work (or reconstructing the building) has given to the person making the supply a certificate in such form as may be specified in a notice published by the Commissioners stating that the supply is zero-rated (in whole or to the extent specified in the certificate) by virtue of this sub-paragraph.
(5) Where a grant, assignment or other supply is zero-rated by virtue of this paragraph, it is not a relevant zero-rated supply for the purposes of paragraph 1 of Schedule 6A to the [1983 c. 55.] Value Added Tax Act 1983.
(6) Nothing in paragraphs 5 and 6 of that Schedule shall apply—
(a) in relation to a person who has constructed a building if he incurred before 21st June 1988 a legally binding obligation to make a grant or assignment of a major interest in, or in any part of, the building or its site;
(b) in relation to a building or work if there was incurred before that date a legally binding obligation to make in relation to the building or work a supply within item 2 of Group 8 of Schedule 5 to the Value Added Tax Act 1983;
(c) in relation to a person who has constructed a building if—
(i) he incurred before that date a legally binding obligation to construct the building or any development of which it forms part, and
(ii) planning permission for the construction of the building was granted before that date,
except where that person does not make a grant or assignment of a major interest in, or in any part of, the building or its site before 21st June 1993.
(7) If the Commissioners so require, proof of any of the matters specified in sub-paragraph (6)(a), (b) or (c)(i) above shall be given to their satisfaction by the production of documents made before 21st June 1988.
Finance Act 1989