Office of Public Sector Information

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 body corporate which 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

(c) the notification contains information so specified.

(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 body corporate which 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 body corporate which 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 making a real estate election and any time, means a body corporate which is treated under sections 43A to 43D(13) as a member of the same group as that person 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).

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) the taxpayer has not used the land since the option had effect,

(c) no tax has become chargeable as a result of the option,

(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

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

(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 as they specify in their permission.

(7) The Commissioners may specify an earlier day 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

(c) the Commissioners consider that the grounds on which those conditions are not so met are insignificant.

(8) The day specified may be the day from which the option would have been revoked if those conditions had been so met.

(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) Paragraphs 22(2) and (3) and 24 (which in particular circumstances treat an option to tax exercised in relation to any building or land as revoked) do not apply if—

(a) the person exercising the option mentioned in paragraph 22(2) or (3) or 24 (“the opter”) is a body corporate,

(b) the opter has been treated under sections 43A to 43D(14) as a member of a group at any time in the relevant 6 year period, and

(c) any relevant associate of the opter in relation to the building or land ceases to be treated under those sections as a member of the same group as the opter without at the same time ceasing to be a relevant associate of the opter in relation to the building or land in accordance with paragraph 3(4).

(2) In sub-paragraph (1)(c) the reference to a relevant associate of the opter in relation to any building or land includes a body corporate which has been a relevant associate of the opter in relation to the building or land at any time before the start of the relevant 6 year period.

(3) In this paragraph “the relevant 6 year period”, in relation to any option to tax, means the period of 6 years ending with the time from which the option would (but for this paragraph) have been treated as revoked as a result of paragraph 22(2) or (3) or 24.

Exclusion of new building from effect of an option

27.—(1) This paragraph applies if—

(a) a person (“the taxpayer”) has at any time opted to tax any land,

(b) at any subsequent time the construction of a building (“the new building”) on the land begins, and

(c) no land within the curtilage of the new building is within the curtilage of an existing building.

(2) The taxpayer may exclude—

(a) the whole of the new building, and

(b) all the land within its curtilage,

from the effect of the option if notification of that exclusion is given to the Commissioners.

(3) The exclusion has effect from the earliest of the following times—

(a) the time when a grant of an interest in, or in any part of, the new building is first made,

(b) the time when the new building, or any part of it, is first used,

(c) the time when the new building is completed.

(4) The notification of the exclusion must—

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

(b) be given before the time from which it is to have effect and state that time, and

(c) contain other information so specified.

(5) Sub-paragraphs (4) to (6) of paragraph 18 (meaning of “building”) apply for the purposes of this paragraph as they apply for the purposes of that paragraph.

(6) For the purposes of this paragraph the reference to the construction of a building is to be read without regard to Note (17)(15) or (18)(b) of Group 5 of Schedule 8 (which would otherwise apply as a result of paragraph 33 of this Schedule).

(7) The Commissioners may publish a notice for determining the time at which the construction of a building on any land is to be taken to begin for the purposes of this paragraph.

Pre-option exempt grants: requirement for prior permission before exercise of option to tax

28.—(1) This paragraph applies if—

(a) a person wants to exercise an option to tax any land with effect from a particular day,

(b) at any time (“the relevant time”) before that day the person has made, makes or intends to make an exempt supply to which any grant in relation to the land gives rise, and

(c) the relevant time is within the period of 10 years ending with that day.

(2) The person may exercise the option to tax the land only if—

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

(b) the person gets the prior permission of the Commissioners (but see also paragraph 30).

(3) The Commissioners must refuse their permission if they are not satisfied that there would be a fair and reasonable attribution of relevant input tax to relevant supplies.

(4) For this purpose—

“relevant input tax” means input tax incurred, or likely to be incurred, in relation to the land, and

“relevant supplies” means supplies to which any grant in relation to the land gives rise which would be taxable (if the option has effect).

(5) In deciding whether there would be a fair and reasonable attribution of relevant input tax to relevant supplies, the Commissioners must have regard to all the circumstances of the case.

(6) But they must have regard in particular to—

(a) the total value of any exempt supply to which any grant in relation to the land gives rise and which is made or to be made before the day from which the person wants the option to have effect,

(b) the expected total value of any supply to which any grant in relation to the land gives rise that would be taxable (if the option has effect), and

(c) the total amount of input tax incurred, or likely to be incurred, in relation to the land.

Paragraph 28: application for prior permission

29.—(1) An application for the prior permission of the Commissioners under paragraph 28 must—

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

(b) contain a statement by the applicant certifying which (if any) of the conditions specified in the public notice under paragraph 28(2)(a) are met in relation to the land, and

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

(2) 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.

(3) If the applicant (A) gets the prior permission of the Commissioners, A is, as a result of this sub-paragraph, treated for the purposes of this Part of this Schedule as if A had exercised the option to tax the land with effect from—

(a) the start of the day on which the application was made, or

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

Paragraph 28: purported exercise where prior permission not obtained

30.—(1) This paragraph applies if—

(a) an option to tax was purportedly exercised in a case where, before the option could be exercised, the prior permission of the Commissioners was required under paragraph 28, and

(b) notification of the purported option was purportedly given to the Commissioners in accordance with paragraph 20.

(2) The Commissioners may, in the case of any such option, subsequently dispense with the requirement for their prior permission to be given under paragraph 28.

(3) If the Commissioners dispense with that requirement, a purported option—

(a) is treated for the purposes of this Part of this Schedule as if it had instead been validly exercised, and

(b) has effect in accordance with paragraph 19.

Supplementary provisions

Timing of grant and supplies

31.—(1) This paragraph applies if—

(a) an option to tax is exercised in relation to any land,

(b) a grant in relation to the land would otherwise be taken to have been made (whether in whole or in part) before the time when the option has effect, and

(c) the grant gives rise to supplies which are treated for the purposes of this Act as taking place after that time.

(2) For the purposes of this Part of this Schedule, the option to tax has effect, in relation to those supplies, as if the grant had been made after that time.

Supplies in relation to a building where part designed or intended for residential or charitable use and part designed or intended for other uses

32.  Note (10) of Group 5(16) of Schedule 8 applies for the purposes of this Part of this Schedule.

Definitions in Schedules 8 or 9 that are applied for the purposes of this Schedule

33.  In this Part of this Schedule, references to the expressions listed in the first column are to be read in accordance with the provisions listed in the second column—

Other definitions etc

34.—(1) In this Part of this Schedule—

“notification” means written notification, and

“permission” means written permission.

(2) For the purposes of this Part of this Schedule any question whether a person is connected with another person is to be decided in accordance with section 839 of the Taxes Act(20).

(3) Any reference in any provision of this Part of this Schedule to a public notice is to a notice published by the Commissioners for the purposes of that provision.

PART 2 RESIDENTIAL AND CHARITABLE BUILDINGS: CHANGE OF USE ETC

Meaning of “relevant zero-rated supply”

35.  For the purposes of this Part of this Schedule a “relevant zero-rated supply” means a grant or other supply which—

(a) relates to a building (or part of a building) intended for use solely for a relevant residential purpose, or

(b) relates to a building (or part of a building) intended for use solely for a relevant charitable purpose,

and which, as a result of Group 5 of Schedule 8, is zero-rated (in whole or in part).

Person to whom supply made grants interest etc in building and building not intended solely for relevant residential or charitable purpose

36.—(1) This paragraph applies if—

(a) one or more relevant zero-rated supplies relating to a building (or part of a building) have been made to a person, and

(b) conditions A and B are met.

(2) Condition A is that, within the period of 10 years beginning with the day on which the building is completed, the person grants an interest in, right over or licence to occupy—

(a) the building or any part of it, or

(b) the building or any part of it including, consisting of or forming part of the part to which the relevant zero-rated supply or supplies related.

(3) Condition B is that after the grant—

(a) the whole or any part of the building or of the part to which the grant relates, or

(b) the whole of the building or of the part to which the grant relates, or any part of it including, consisting of or forming part of the part to which the relevant zero-rated supply or supplies related,

is not intended for use solely for a relevant residential purpose or a relevant charitable purpose.

(4) So far as the grant relates to so much of the building as—

(a) by reason of its intended use gave rise to the relevant zero-rated supply or supplies, and

(b) is not intended for use solely for a relevant residential purpose or a relevant charitable purpose after the grant,

it is taken to be a taxable supply in the course or furtherance of a business which is not zero-rated as a result of Group 5 of Schedule 8.

Person to whom supply made uses building otherwise than for relevant residential or charitable purpose

37.—(1) This paragraph applies if one or more relevant zero-rated supplies relating to a building (or part of a building) have been made to a person and, within the period of 10 years beginning with the day on which the building is completed, the person uses—

(a) the building or any part of it, or

(b) the building or any part of it including, consisting of or forming part of the part to which the relevant zero-rated supply or supplies related,

for a purpose which is neither a relevant residential purpose nor a relevant charitable purpose.

(2) The person’s interest in, right over or licence to occupy so much of the building as—

(a) by reason of its intended use gave rise to the relevant zero-rated supply or supplies, and

(b) is used otherwise than for a relevant residential purpose or a relevant charitable purpose,

is treated as follows.

(3) The interest, right or licence is treated for the purposes of this Act as—

(a) supplied to the person for the purposes of a business which the person carries on, and

(b) supplied by the person in the course or furtherance of the business when the person first uses it for a purpose which is neither a relevant residential purpose nor a relevant charitable purpose.

(4) The supply is taken to be a taxable supply which is not zero-rated as a result of Group 5 of Schedule 8.

(5) The value of the supply is taken to be the amount obtained by the formula—

(6) For the purposes of the formula, A is the amount that yields an amount of VAT chargeable on it equal to—

(a) the VAT which would have been chargeable on the relevant zero-rated supply, or

(b) if there was more than one supply, the aggregate amount of the VAT which would have been chargeable on the supplies,

had so much of the building not been intended for use solely for a relevant residential purpose or a relevant charitable purpose.

(7) For the purposes of the formula, B is the number of whole years since the day the building was completed for which the building or part concerned has been used for—

(a) a relevant residential purpose, or

(b) a relevant charitable purpose.

Supplies in relation to a building where part designed for residential or charitable use and part designed for other uses

38.  Note (10) of Group 5 of Schedule 8 applies for the purposes of this Part of this Schedule.

Definitions

39.  In this Part of this Schedule, references to the expressions listed in the first column are to be read in accordance with the provisions listed in the second column—

PART 3 GENERAL

Benefit of consideration for grant accruing to a person other than the grantor

40.—(1) This paragraph applies if the benefit of the consideration for the grant of an interest in, right over or licence to occupy land accrues to a person (“the beneficiary”) other than the person making the grant.

(2) The beneficiary is to be treated for the purposes of this Act as the person making the grant.

(3) So far as any input tax of the person actually making the grant is attributable to the grant, it is to be treated for the purposes of this Act as input tax of the beneficiary.”.

3.  Appeals

(1) VATA 1994(23) is amended as follows.

(2) In section 83(24) (appeals), after paragraph (wa) insert—

“(wb) any refusal of the Commissioners to grant any permission under, or otherwise to exercise in favour of a particular person any power conferred by, any provision of Part 1 of Schedule 10;”.

(3) In section 84(25) (further provisions relating to appeals), after subsection (7A) insert—

“(7ZA) Where there is an appeal against such a refusal as is mentioned in section 83(wb)—

(a) the tribunal shall not allow the appeal unless it considers that the Commissioners could not reasonably have been satisfied that there were grounds for the refusal, and

(b) the refusal shall have effect pending the determination of the appeal.”.

4.  Developmental tenancies, leases or licences

(1) Paragraph (b) of item 1 in Group 1 of Schedule 9 to VATA 1994 (exempt supplies of land not to include supplies made pursuant to a developmental tenancy, developmental lease or developmental licence) is repealed.

(2) Note (7)(26) in that Group (meaning of developmental tenancy, developmental lease or developmental licence) is repealed.

5.  Co-owners etc of buildings and land

(1) Section 26 of FA 1995(27) (co-owners etc of buildings and land) is repealed.