Explanatory note

This Order, which comes into force on 10th April 2003, further amends the Value Added Tax (Supply of Services) Order (S.I. 1993/1507) (“the principal Order”). These changes are being made in conjunction with changes to paragraph 5 of Schedule 4 to the Value Added Tax Act 1994.

The principal Order treats a person as making a supply of services when he puts services he has received to a private or non-business use. This only applies if he recovered VAT on his purchase of the services on the basis that they were to be used wholly for business purposes.

Article 1 applies the changes only in respect of supplies that the taxable person receives on or after 10th April 2003. There is no change in respect of supplies received before that date, even if the change of use occurs on or after that date.

Article 3 amends the principal Order to clarify that it cannot be used to recover VAT on purchases where that VAT would otherwise not be input tax (ie not VAT incurred for business purposes). Thus the principal Order cannot be used to avoid making a business/non-business apportionment of input tax, and to recover VAT in full on purchases.

Article 3A extends the application of the principal Order to major interests in land and land-related supplies of goods. The changes mirror the exclusion of these assets from Paragraph 5(4) of Schedule 4 to the Value Added Tax Act 1994. As a result, the principal Order will apply to changes of use of these assets from business use to private or non-business use, including partial changes of use. Where the principal Order is applied to a change of use of goods as a result of this amendment, article 3B treats the change of use as giving rise to a supply of a service of making the goods available for the private or non-business use.