Section 107 — Value Added Tax Regulations 1995: Adjustment of attribution

Adjustment of attribution 107 — 1 Subject to regulation 105A(1)(b), where a taxable person to whom a longer period is applicable has provisionally attributed an amount of input tax to taxable supplies in accordance with a method or treated an amount of input tax as attributable to taxable supplies under regulation 105A(1)(a) or regulation 106ZA(1) ... and save as the Commissioners may dispense with the following requirement to adjust, he ...—

a shall, subject to sub-paragraphs (b), (c), (d) and (da) below , determine for the longer period the amount of input tax which is attributable to taxable supplies according to the method used in the prescribed accounting periods, b shall, where he has provisionally attributed input tax in accordance with regulation 101(2)(e) in any prescribed accounting period, determine for the longer period the amount of residual input tax which is attributable to taxable supplies on the basis of the extent to which the goods or services are used or to be used by him in making taxable supplies, c may, where he has not provisionally attributed input tax in accordance with regulation 101(2)(e) but was nevertheless entitled to do so, determine for the longer period the amount of residual input tax which is attributable to taxable supplies on the basis of the extent to which the goods or services are used or to be used by him in making taxable supplies, d shall, where he has provisionally attributed residual input tax under regulation 101(2)(f), determine for the longer period the amount of residual input tax which is attributable to taxable supplies using the calculation specified in regulation 101(2)(d) subject to the provisions of regulation 101(3) to (5),

da shall, where he has treated an amount of input tax as attributable to taxable supplies under regulation 105A(1)(a) or regulation 106ZA(1), determine for the longer period the amount of input tax that is attributable to taxable supplies in accordance with sub-paragraphs (a) to (d) above as appropriate, e shall , except where a taxable person is using a method provided for in regulation 102(1) to make the apportionment referred to in regulation 102ZA(1), apply the tests set out in regulation 106 to determine whether all input tax in the longer period in question shall be treated as attributable to taxable supplies, f shall calculate the difference between the amount of input tax determined to be attributable to taxable supplies under subparagraphs (a) to (e) above and the amounts of input tax, if any, which were deducted in the returns for the prescribed accounting periods, and g shall include any such amount of over-deduction or under-deduction in a return for—

i the first prescribed accounting period next following the longer period, or ii the last prescribed accounting period in the longer period, except where the Commissioners allow another return to be used.

2 Where a taxable person makes no adjustment as required by paragraph (1) above, the requirement shall be that the adjustment is made in the return for the first prescribed accounting period next following the longer period.

3 But where a registered person has his registration cancelled at or before the end of a longer period, he shall account for any adjustment under this regulation on his final return.

4 In this regulation “residual input tax” has the same meaning as in regulation 101(10). 107A 1 This regulation applies where a taxable person has made an attribution under regulation 101(2)(b) and (d) and the prescribed accounting period does not form part of a longer period, and the attribution differs substantially from one which represents the extent to which the goods or services are used by him or are to be used by him, or a successor of his, in making taxable supplies.

2 Where this regulation applies, the taxable person shall calculate the difference and account for it on the return for the first prescribed accounting period next following the prescribed accounting period referred to in paragraph (1) above, except where the Commissioners allow another return to be used for this purpose.

3 But where a registered person has his registration cancelled at or before the end of the prescribed accounting period referred to in paragraph (1) above, he shall account for any adjustment under this regulation on his final return. 107B 1 Other than where input tax falls to be attributed under regulation 101(8) or regulation 107(1)(b) or (c), this regulation applies where a taxable person has made an attribution under regulation 107(1)(a) or (d) according to the method specified in regulation 101 and that attribution differs substantially from one which represents the extent to which the goods or services are used by him or are to be used by him, or a successor of his, in making taxable supplies.

2 Where this regulation applies the taxable person shall—

a calculate the difference, and b in addition to any amount required to be included under regulation 107(1)(g) , account for the amount so calculated on the return for the first prescribed accounting period next following the longer period or the return for the last prescribed accounting period in the longer period if applicable , except where the Commissioners allow another return to be used for this purpose.

3 But where a registered person has his registration cancelled at or before the end of a longer period, he shall account for any adjustment under this regulation on his final return. 107C For the purposes of regulations 107A and 107B, a difference is substantial if it exceeds—

a £50,000; or b 50% of the amount of input tax falling to be apportioned under regulation 101(2)(d) within the prescribed accounting period referred to in regulation 107A(1), or longer period, as the case may be, but is not less than £25,000. 107D For the purposes of regulations 107A and 107B a person is the successor of another if he is a person to whom that other person has—

a transferred assets of his business by a transfer of that business, or part of it, as a going concern;

and b the transfer of the assets is one falling by virtue of an Order under section 5(3) of the Act to be treated as neither a supply of goods nor a supply of services; and the reference in this regulation to a person’s successor includes references to the successors of his successors through any number of transfers. 107E 1 Regulations 107A and 107B shall not apply where the amount of input tax falling to be apportioned under regulation 101(2)(d) within the prescribed accounting period referred to in regulation 107A(1), or longer period, as the case may be, does not exceed—

a in the case of a person who is a group undertaking in relation to one or more other undertakings (other than undertakings which are treated under sections 43A to 43C of the Act as members of the same group as the person), £25,000 per annum, adjusted in proportion for a period that is not 12 months; or b in the case of any other person, £50,000 per annum, adjusted in proportion for a period that is not 12 months.

2 For the purposes of paragraph (1) above, “undertaking” and “group undertaking” have the same meaning as in section 1161 of the Companies Act 2006 . 107F The references in regulations 107C and 107E to an apportionment under regulation 101(2)(d) in relation to a longer period include cases where the apportionment is made under regulation 107(1)(a) or (d) using the calculation specified in regulation 101(2)(d). 108 — 1 This regulation applies where a taxable person has deducted an amount of input tax which has been attributed to taxable supplies because he intended to use the goods or services in making either—

a taxable supplies, or b both taxable and exempt supplies, and during a period of 6 years commencing on the first day of the prescribed accounting period in which the attribution was determined and before that intention is fulfilled, he uses or forms an intention to use the goods or services concerned in making exempt supplies or, in the case of an attribution within sub-paragraph (a) above, in making both taxable and exempt supplies.

2 Subject to regulation 110 and save as the Commissioners otherwise allow, where this regulation applies the taxable person shall on the return for the prescribed accounting period in which the use occurs or the intention is formed, as the case may be, account for an amount equal to the input tax which has ceased to be attributable to taxable supplies in accordance with the method which he was required to use when the input tax was first attributed and he shall repay the said amount to the Commissioners.

3 For the purposes of this regulation any question as to the nature of any supply shall be determined in accordance with the provisions of the Act and any Regulations or Orders made thereunder in force at the time when the input tax was first attributed. 109 — 1 This regulation applies where a taxable person has incurred an amount of input tax which has not been attributed to taxable supplies because he intended to use the goods or services in making either—

a exempt supplies, or b both taxable and exempt supplies, and during a period of 6 years commencing on the first day of the prescribed accounting period in which the attribution was determined and before that intention is fulfilled, he uses or forms an intention to use the goods or services concerned in making taxable supplies or, in the case of an attribution within sub-paragraph (a) above, in making both taxable and exempt supplies.

2 Subject to regulation 110 and where this regulation applies, the Commissioners shall, on receipt of an application made by the taxable person in such form and manner and containing such particulars as they may direct, pay to him an amount equal to the input tax which has become attributable to taxable supplies in accordance with the method which he was required to use when the input tax was first attributed.

3 For the purposes of this regulation any question as to the nature of any supply shall be determined in accordance with the provisions of the Act and any Regulations or Orders made thereunder in force at the time when the input tax was first attributed. 109A 1 This regulation applies where a taxable person—

a has incurred an amount of input tax in relation to goods which has not been attributed to taxable supplies because the person has used the goods in making either—

i exempt supplies, or ii both taxable supplies and exempt supplies, b is treated as having made a taxable supply of those goods (“the deemed supply”) in accordance with paragraph 31A of Schedule 9ZB to the Act, and c the deemed supply is made in a subsequent tax year to the tax year in which the input tax was incurred.

2 Subject to regulation 110 and where this regulation applies, the Commissioners shall, on receipt of an application made by the taxable person in such form and manner and containing such particulars as they may direct, pay to the person an amount equal to the input tax which has become attributable to the deemed supply in accordance with the method which the person was required to use when the input tax was first attributed.

3 For the purposes of this regulation any question as to the nature of any supply shall be determined in accordance with the provisions of the Act or any Regulations or Orders made thereunder in force at the time when the input tax was first attributed. 110 1 Subject to paragraph (2) below, in this regulation, in regulations 103B, 108 and 109 above and in Part XV of these Regulations—

a “exempt supplies” includes supplies outside the United Kingdom which would be exempt if made in the United Kingdom, other than supplies of a description falling within subparagraph (b) below;

and b “taxable supplies” includies supplies of a description falling within regulation 103 above.

2 Subject to paragraph (3) below, for the purposes of identifying the use, or intended use, of goods and services in regulations 108 and 109 above and in Part XV of these Regulations—

a “exempt supplies” shall be construed as including supplies of a description falling within regulation 103A(1) above, but only to the extent that there is, or would be, no credit for input tax on goods and services under that regulation;

and b “taxable supplies” shall be construed as including supplies of a description falling within regulation 103A(1) above, but only to the extent that there is, or would be , credit for input tax on goods and services under that regulation.

3 Any adjustment under regulations 108 and 109 above shall not cause any more or any less input tax to be credited, as the case may be, in respect of supplies of a description falling within regulation 103A(1) above than would be allowed or required under that regulation.

4 Subject to regulations 103 and 103B , where—

a regulation 108 or 109 applies, b the use to which the goods or services concerned are put, or to which they are intended to be put, includes the making of any supplies outside the United Kingdom, and c at the time when the taxable person was first required to attribute the input tax he was not required to use a method approved or directed under regulation 102 or that method did not provide expressly for the attribution of input tax attributable to supplies outside the United Kingdom, the amount for which the taxable person shall be liable to account under regulation 108 or the amount which he is entitled to be paid under regulation 109, as the case may be, shall be calculated by reference to the extent to which the goods or services concerned are used or intended to be used in making taxable supplies, expressed as a proportion of the whole use or intended use.

5 In regulations 108 and 109 a reference to—

a “exempt supplies” includes a reference to non-business activities that give rise to an amount of non-business VAT ;

b a method which a taxable person is required to use includes a reference to an apportionment which a taxable person is required to make under section 24(5) of the Act.