The Value Added Tax (Miscellaneous Amendments, Northern Ireland Protocol and Savings and Transitional Provisions) (EU Exit) Regulations 2020

24.  After that Schedule insert—

Art 8(2)

“SCHEDULE 2 U.K. Disallowance of input tax in relation to acquisitions in Northern Ireland from the EU

1.— (1) In this Schedule “NI acquisition VAT” means VAT charged by paragraph 1(3) of Schedule 9ZA to the Act.

(2) NI acquisition VAT charged on the acquisition in Northern Ireland of such goods from a member State as are described in sub-paragraph (3) which are acquired by a taxable person in the circumstances described in sub-paragraph (4) is excluded from any credit under section 25 of the Act.

(3) The goods referred to in sub-paragraph (2) are—

(a) works of art, antiques and collectors' items, and

(b) second-hand goods.

(4) The circumstances of the acquisition from a member State referred to in sub-paragraph (2) are where—

(a) the goods are acquired in connection with a supply which, by virtue of the law of the member State in which the supply took place, VAT was chargeable on the profit margin; and

(b) if the goods are a work of art, they are acquired from a member State from its creator or the creator's successor in title.

(5) Sub-paragraph (2) only excludes from credit NI acquisition VAT on an acquisition of goods by a taxable person in the circumstances set out in sub-paragraph (4)(b) if the taxable person—

(a) has opted to account for VAT chargeable on the supplies of such goods on the profit margin in accordance with the provisions of an Order made under section 50A of the Act; and

(b) has not elected, in accordance with such an Order, to account for VAT chargeable on the supply of the goods by reference to its value.

2.— (1) NI acquisition VAT charged on the acquisition in Northern Ireland of goods from a member State by a taxable person is excluded from any credit under section 25 of the Act, where the goods are used or are to be used by the taxable person for the purposes of business entertainment unless the entertainment is provided for an overseas customer of the taxable person and is of a kind and on a scale which is reasonable, having regard to all the circumstances.

(2) For the purposes of this paragraph, “business entertainment” means entertainment including hospitality of any kind provided by a taxable person in connection with a business carried on by that person, but does not include the provision of any such entertainment for either or both—

(a) employees of the taxable person; and

(b) if the taxable person is a body corporate, its directors or persons otherwise engaged in its management.

(3) But the exception in relation to the provision of entertainment for persons such as are mentioned in sub-paragraph (2)(a) and (b) does not apply where the provision of the entertainment is incidental to its provision for others.

(4) For the purposes of this paragraph, “overseas customer”, in relation to a taxable person, means—

(a) any person who is not ordinarily resident nor carrying on a business in the United Kingdom or the Isle of Man and avails himself or herself, or may be expected to avail himself or herself, in the course of a business carried on by that person outside the United Kingdom and the Isle of Man, of any goods or services the supply of which forms part of the taxable person's business; and

(b) any person who is not ordinarily resident in the United Kingdom or the Isle of Man and is acting, in relation to such goods or services, on behalf of an overseas customer as defined in paragraph (a) or on behalf of any government or public authority outside the United Kingdom and the Isle of Man.

3.   Where a taxable person constructing or effecting any works to a building of a description in Schedule 8 to the Act for the purpose of making a grant of a major interest in it (or any part of it or its site), incorporates goods other than building materials in any part of the building or its site, NI acquisition VAT charged on the acquisition in Northern Ireland of such goods from a member State by the taxable person is excluded from any credit under section 25 of the Act.

4.— (1) NI acquisition VAT charged on the acquisition in Northern Ireland of a motor car from a member State is excluded from any credit under section 25 of the Act.

(2) Sub-paragraph (1) does not apply where the motor car—

(a) is a qualifying motor car which is acquired in Northern Ireland from a member State by a taxable person and the relevant condition is satisfied;

(b) forms part of the stock in trade of a motor manufacturer or a motor dealer;

(c) is acquired in Northern Ireland from a member State by a taxable person whose only taxable supplies are concerned with the letting of motor cars on hire to another taxable person whose business consists predominantly of making supplies of a description falling within item 14 of Group 12 of Schedule 8 to the Act; or

(d) is unused and is supplied on a letting on hire to a taxable person whose business consists predominantly of making supplies of a description falling within item 14 of Group 12 of Schedule 8 to the Act, by a taxable person whose only taxable supplies are concerned with the letting on hire of motor cars to such a taxable person.

(3) For the purposes of this paragraph a motor car is a qualifying motor car if it has never been supplied, acquired from a member State (under the provisions of the Act applicable at the time) or imported, in circumstances in which the VAT on that supply, acquisition or importation was wholly excluded from credit as input tax by virtue of the provisions of this Order.

(4) For the purposes of paragraph 4(2)(a), the relevant condition is that the motor car is acquired by a taxable person who intends to use the motor car—

(a) exclusively for the purposes of a business carried on by that person; or

(b) primarily for a relevant purpose.

(5) For the purposes of sub-paragraph (4)(a), a taxable person is not to be regarded as intending to use a motor car exclusively for the purposes of a business carried on by that person if that person intends—

(a) to let it on hire to any person either for no consideration or for a consideration which is less than that which would be payable in money if it were a commercial transaction conducted at arm's length; or

(b) to make it available (otherwise than by letting it on hire) to any person (including, where the taxable person is an individual, to that taxable person or, where the taxable person is a partnership, a partner) for private use, whether or not for a consideration.

(6) For the purposes of sub-paragraph (4)(b), a relevant purpose is any of the following—

(a) to provide it on hire with the services of a driver for the purpose of carrying passengers;

(b) to provide it for self-drive hire;

(c) to use it as a vehicle in which instruction in the driving of a motor car is to be given by that person.

(7) In paragraph (6)(b) “self-drive hire” means hire where the hirer is the person normally expected to drive the motor car and the period of hire to each hirer, together with the period of hire of any other motor car expected to be hired to him by the taxable person—

(a) will normally be less than 30 consecutive days; and

(b) will normally be less than 90 days in any period of 12 months.”.

Commencement Information

I1 Reg. 24 in force at 31.12.2020 by S.I. 2020/1641, reg. 2, Sch.