HC Deb 20 March 1989 vol 149 cc835-8

1.—(1) In this paragraph "relevant zero-rated supply" means a grant or other supply taking place on or after 1st April 1989 which—

  1. (a) relates to a building intended for use solely for a relevant residential purpose or a relevant charitable purpose or part of such a building; and
  2. (b) is zero-rated, in whole or in part, by virtue of Group 8 of Schedule 5 to this Act.

(2) Sub-paragraph (3) below applies where—

  1. (a) one or more relevant zero-rated supplies relating to a building (or part of a building) have been made to any person;
  2. (b) within the period of ten years beginning with the day on which the building is completed, the person grants an interest in, right over or licence to occupy the building or any part of it (or the 836 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); and
  3. (c) after the grant the whole or any part of the building, or of the part to which the grant relates, (or 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.

(3) Where this sub-paragraph applies, to the extent that the grant relates to so much of the building as—

  1. (a) by reason of its intended use gave rise to the relevant zero-rated supply or supplies; and
  2. (b) is not intended for use solely for a relevant residential purpose or a relevant charitable purpose after the grant,

it shall be taken to be a taxable supply in the course or furtherance of a business which is not zero-rated by virtue of Group 8 of Schedule 5 to this Act (if it would not otherwise be such a supply).

(4) Sub-paragraph (5) below applies where—

  1. (a) one or more relevant zero-rated supplies relating to a building (or part of a building) have been made to any person; and
  2. (b) within the period of ten years beginning with the day on which the building is completed, the person uses the building or any part of it (or 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.

(5) Where this sub-paragraph applies, his interest in, right over or licence to occupy so much of the building as—

  1. (a) by reason of its intended use gave rise to the relevant zero-rated supply or supplies; and
  2. (b) is used otherwise than for a relevant residential purpose or a relevant charitable purpose,

shall be treated for the purposes of this Act as supplied to him for the purpose of a business carried on by him and supplied by him in the course or furtherance of the business when he first uses it for a purpose which is neither a relevant residential purpose nor a relevant charitable purpose.

(6) Where sub-paragraph (5) above applies—

  1. (a) the supply shall be taken to be a taxable supply which is not zero-rated by virtue of Group 8 of schedule 5 to this Act (if it would not otherwise be such a supply); and
  2. (b) the value of the supply shall be such that the amount of tax chargeable on it is equal to the amount of the tax which would have been chargeable on the relevant zero-rated supply (or, where there was more than one such supply, the aggregate amount which would have been chargeable on them) had so much of the building as is mentioned in sub-paragraph (5) above not been intended for use solely for a relevant residential purpose or a relevant charitable purpose.

2. The Notes to Group 8 of Schedule 5 to this Act apply in relation to this Schedule as they apply in relation to that Group but subject to any appropriate modifications."

(12) In section 48 of the Value Added Tax Act 1983, after the definition of "Commissioners" there shall be inserted—

" "fee simple", in relation to Scotland, means—

  1. (a) the estate or interest of the proprietor of the dominium utile, or
  2. (b) in the case of land not held on feudal tenure, the estate or interest of the owner;".

(13) In Schedule 1 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 (I) above, it shall not be if it is supplied on a taxable supply which is not zero-rated."

(14) Subject to paragraphs (16) to (19) of this Resolution, the amendments made by paragraphs (1) to (9) of this Resolution shall have effect in relation to grants, assignments and other supplies made on or after 1st April 1989.

(15) The remainder of this Resolution shall come into force on 1st April 1989.

(16) Subject to paragraph (18) of this Resolution, the amendments made by paragraphs (1) to (6) of this Resolution shall not have effect in relation to a grant, assignment or other supply where—

  1. (a) it is made in pursuance of a legally binding obligation to make it which was incurred before 21st June 1988, and
  2. (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.

(17) Subject to paragraph (18) of this Resolution, the amendments made by paragraphs (1) to (6) of this Resolution 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—

  1. (a) 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),
  2. (b) 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
  3. (c) planning permission for the construction (or reconstruction) of the building was granted before 21st June 1988.

(18) Where the grant or assignment is of a tenancy or lease—

  1. (a) if a premium is payable, paragraph (16) or (17) of this Resolution shall apply only to the extent that it is made for consideration in the form of the premium; and
  2. (b) if a premium is not payable, paragraph (16) or (17) of this Resolution 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.

(19) The amendments made by paragraphs (1) to (6) of this Resolution shall not not have effect in relation to a supply relating to a building or civil engineering work where—

  1. (a) the supply is made to the person constructing the building or work (or reconstructing the building),
  2. (b) 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),
  3. (c) 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,
  4. (d) planning permission for the construction of the building or work (or the reconstruction of the building) was granted before 21st June 1988, and
  5. (e) before the supply takes place the person construct-ing 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 838 the supply is zero-rated (in whole or to the extent specified in the certificate) by virtue of this paragraph.

(20) Where a grant, assignment or other supply is zero-rated by virtue of paragraph (16), (17) or (19) of this Resolution, it is not a relevant zero-rated supply for the purposes of paragraph 1 of Schedule 6A to the Value Added Tax Act 1983.

(21) This Resolution shall be construed as one with the Value Added Tax Act 1983.

This Resolution shall not authorise the making of amendments that would make value added tax chargeable at a rate other than either nil or the rate specified in section 9 of the Value Added Tax Act 1983.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Lawson.]