# The Value Added Tax (Amendment) (No. 4) Regulations 2004, Note: Explanatory note


(This note is not part of the Regulations)
These Regulations, which come into force in accordance with regulation 2, further amend the Value Added Tax Regulations 1995 (S.I. 1995/2518) (“the principal Regulations”).
Natural gas and electricity
Part 2 of these regulations makes amendments to the principal Regulations as a consequence of the implementation of Council Directive 2003/92/EC (OJ L260, 11.10.03 p.8). This has required a package of new measures which apply to supplies of natural gas and electricity. A transposition note in respect of this implementation is available at www.hmce.gov.uk.
Regulation 4 inserts a new regulation 82A in the principal Regulations. This establishes the time of supply for supplies of gas through the natural gas distribution network and of electricity, in circumstances where such supplies are treated, under section 9A of the Value Added Tax Act 1994, as being made in the UK by the recipient of the supply.
Regulation 5 makes a consequential amendment to regulation 95 of the principal Regulations to bring regulation 82A within the scope of section 88 of the Value Added Tax Act 1994.
Regulation 6 makes a consequential amendment to regulation 175(b)(iii) of the principal Regulations. This is to ensure that a supplier, in the case of a supply subject to section 9A of the Value Added Tax Act 1994, remains eligible for the refund procedure for community traders in Part XX of the principal Regulations.
A full regulatory impact assessment of the effect that Part 2 of this instrument will have on the costs of businesses is available at www.hmce.gov.uk.
Partial exemption
Part 3 of these Regulations makes amendments to the principal Regulations in respect of partial exemption.
Regulation 7 amends regulation 103 of the principal Regulations by removing paragraphs (2) and (3).
Regulation 8 inserts a new regulation 103B into the principal Regulations to replace the old regulation 103(2) and (3). The previous provisions dealt only with the attribution of input tax where certain supplies of financial services (for example share issues) were made outside the EU. The new regulation deals with the attribution of input tax on certain costs as specified which are used partly to make incidental financial supplies within the EU and partly to make other supplies. In such cases, attribution is to be based solely on the use or intended use of the costs concerned.
Regulations 9 to 14 provide for consequential amendments which result from the amendments made by regulations 7 and 8.
A full regulatory impact assessment has not been produced for Part 3 of this instrument as it has no impact on the costs of businesses, charities or voluntary bodies.
Repayments to third country traders
Part 4 of these Regulations completes the implementation of Council Directive 86/560/EEC (OJ L326, 21.11.86, p 40.) (the Thirteenth VAT Directive), giving effect to Article 2. A transposition note is available at www.hmce.gov.uk .
The right to recover VAT on expenses is extended to businesses established outside the EU who make no supplies within the EU (other than some supplies for which output tax is accounted using the reverse charge), by the Thirteenth Directive. This defines the VAT which can be reclaimed by such businesses by cross-reference to Article 17(3) of the Sixth Directive (Council Directive 77/388/EEC).
Though input tax on expenses relating to exempt supplies cannot usually be recovered, there is a special rule in Art 17(3)(c) of the Sixth Directive that allows such tax to be deducted when it is incurred on expenses relating to the supply of certain financial and insurance services by a supplier within the EU to a customer located outside the EU, or to the supply of such services when they directly relate to exports from the EU. This means that suppliers of such financial and insurance services within the EU do not bear irrecoverable VAT on the supply of these “exported” services. Article 17(3)(c) of the Sixth Directive is enacted in UK law by article 3 of the Value Added Tax (Input Tax) (Specified Supplies) Order 1999 (S.I. 1999/3121).
However, the Thirteenth Directive defines the categories of tax to be refunded to non-EU established businesses in Article 2, by reference to Article 17(3) of the Sixth Directive, and it does not include the right to recover tax on supplies used in making the supplies described in Article 17(3)(c).
Regulation 15 amends regulation 190(1) of the principal Regulations. It adds a new category of expenditure to those already listed in that regulation, in respect of which refunds will not be made to businesses established outside the EU. The new category is that of VAT on expenses used in making supplies of the financial and insurance services described article 3 of the Value Added Tax (Input Tax) (Specified Supplies) Order 1999, which are those described in Article 17(3)(c) of the Sixth Directive.
A full regulatory impact assessment has not been produced for Part 4 of this instrument, as it has no impact on the costs of UK business, charities or voluntary bodies.

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Source: https://www.legislation.gov.uk/uksi/2004/3140/note (the official version)
Page: https://openlegislation.uk/value-added-tax-amendment-no-4-regulations-2004/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.