Explanatory note
(This note is not part of the Regulations)
These Regulations, which come into force on 10th March 1999, further amend the Value Added Tax Regulations 1995 (S.I. 1995/2518) (“the principal Regulations”).
Regulation 3 inserts a new regulation 94A in Part XI of the principal Regulations in order to prevent potential avoidance. As a result, in Part XI (the regulations determining when a supply is treated as taking place), receipt of payment expressly includes receipt by someone to whom the right to receive the payment has been assigned. This ensures that a payment received by an assignee has the same effect for determining the time of a supply as receipt of such payment by the supplier.
Regulation 4 omits regulation 105 from the principal Regulations to block misuse of the partial exemption arrangements, to make their operation simpler and to address distortions in competition. As a result, exempt input tax can no longer be treated as attributable to taxable supplies unless it fulfils the conditions of regulation 106.
Regulation 5 makes amendments to regulation 107 of the principal Regulations in consequence of regulation 4 of these Regulations.
Regulation 6 amends regulation 115 of the principal Regulations, in order to prevent potential avoidance by VAT-registered businesses when calculating adjustments of input tax on items falling within the capital goods scheme. Under the scheme, input tax deducted on certain capital items must be adjusted periodically if there are later variations in the extent to which the items are used in making taxable supplies. The amendments to paragraphs (1) and (2) require adjustments to be calculated by comparing the use of the capital item in the interval concerned, with the use or intended use which gave rise to the original entitlement to claim input tax. These changes will apply to adjustments made in respect of capital goods scheme adjustment intervals which commence on or after 10th March 1999.
In addition, regulation 6 makes consequential amendments to paragraph (5) of regulation 115, which defines terms used in that regulation.