VALUE ADDED TAX Citation and commencement 1 This Order may be cited as the Value Added Tax (Input Tax) Order 1992, and shall come into force on 1st January 1993. Interpretation 2 In this Order— “the Act” means the Value Added Tax Act 1994 ; “the Manx Act” means the Value Added Tax and Other Taxes Act 1973 ; “antiques” means objects other than works of art or collectors' items, which are more than 100 years old; “collectors' items” means any collection or collector’s piece falling within section 21(5) of the Act but excluding investment gold coins within the meaning of Note 1(b) and (c) to Group 15 of Schedule 9 to the Act; “building materials” means any goods the supply of which would be zero-rated if supplied by a taxable person to a person to whom he is also making a supply of a description within either item 2 or item 3 of Group 5, or item 2 of Group 6, of Schedule 8 to the Act; ... ... “Motor car” means any motor vehicle of a kind normally used on public roads which has three or more wheels and either— is constructed or adapted solely or mainly for the carriage of passengers; or has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows; but does not include— vehicles capable of accommodating only one person; vehicles which meet the requirements of Schedule 6 to the Road Vehicles (Construction and Use) Regulations 1986 and are capable of carrying 12 or more seated persons; vehicles which would otherwise meet the requirements of sub-paragraph (ii) but which can carry fewer than 12 seated persons solely because they have been adapted for wheelchair users; vehicles of not less than three tonnes unladen weight (as defined in the Table to regulation 3(2) of the Road Vehicles (Construction and Use) Regulations 1986); vehicles constructed to carry a payload (the difference between a vehicle’s kerb weight (as defined in the Table to regulation 3(2) of the Road Vehicles (Construction and Use) Regulations 1986) and its maximum gross weight (as defined in that Table)) of one tonne or more; caravans, ambulances and prison vans; vehicles constructed for a special purpose other than the carriage of persons and having no other accommodation for carrying persons than such as is incidental to that purpose; “motor dealer” means a person whose business consists in whole or in part of obtaining supplies of, ... or acquiring in Northern Ireland from a member State or importing, new or second-hand motor cars for resale with a view to making an overall profit on the sale of them (whether or not a profit is made on each sale); “motor manufacturer” means a person whose business consists in whole or part of producing motor cars including producing motors cars by conversion of a vehicle (whether a motor car or not); ... ... “Second-hand goods” means tangible moveable property (including motor cars) that is suitable for further use as it is or after repair other than works of art, collectors' items or antiques and other than precious metals and precious stones; “stock in trade” means new or second-hand motor cars (other than second-hand motor cars which are not qualifying motor cars within the meaning of article 7(2A) below or paragraph 4(3) of Schedule 2 to this Order ) which are— produced by a motor manufacturer or, as the case may require, supplied to ... or acquired in Northern Ireland from a member State or imported by a motor dealer, for the purpose of resale, and are intended to be sold by— a motor manufacturer within 12 months of their production, or by a motor dealer within 12 months of their supply ... , acquisition in Northern Ireland from a member State or importation, as the case may require, and such motor cars shall not cease to be stock in trade where they are temporarily put to a use in the motor manufacturer’s or, as the case may be, the motor dealer’s business which involves making them available for private use; “work of art” has the same meaning as in section 21 of the Act. ... Revocations 3 The provisions specified in the first column of Schedule 1 to this Order are hereby revoked to the extent specified in the second column of that Schedule. Disallowance of input tax 4 1 Subject to paragraph (4) below, tax charged on the— a supply; b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . or c importation, of any goods such as are described in paragraph (2) below which are supplied to, ... or imported by, a taxable person in the circumstances described in paragraph (3) below shall be excluded from any credit under section 25 of the Act; 2 The goods referred to in paragraph (1) above are— a works of art, antiques and collectors' items b second-hand goods; 3 The circumstances of the supply ... or importation referred to in paragraph (1) above are— a a supply on which, by virtue of an Order made under Section 50A of the Act or a corresponding provision of the Manx Act ..., VAT was chargeable on the profit margin; aa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b (if the goods are a work of art, an antique or a collectors' item) the taxable person imported it himself; c (if the goods are a work of art) it was supplied to the taxable person by ... its creator or his successor in title; 4 Paragraph (1) above shall only apply to exclude from credit, tax chargeable on a supply of goods to ... or importation of goods by a taxable person in the circumstances set out in paragraph (3)(b) and (c) above if the taxable person— a has opted to account for VAT chargeable on his supplies of such goods on the profit margin and b has not elected to account for VAT chargeable on his supply of the goods by reference to its value, in accordance with the provisions of an Order made under section 50A of the Act. 5 1 Tax charged on any goods or services supplied to a taxable person, ... or on any goods imported by a taxable person, is to be excluded from any credit under section 25 of the Act, where the goods or services in question are used or 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 Where, by reason of the operation of paragraph (1) above, a taxable person has claimed no input tax on ... a supply of any services, tax shall be charged ... on a supply by him of the services in question, as if that supply were for a consideration equal to the excess of— a the consideration for which the services are supplied by him, over (b) the consideration for which the services were supplied to him, and accordingly shall not be charged unless there is such an excess. 3 For the purposes of this article, “business entertainment” means entertainment including hospitality of any kind provided by a taxable person in connection with a business carried on by him, but does not include the provision of any such entertainment for either or both— a employees of the taxable person; b if the taxable person is a body corporate, its directors or persons otherwise engaged in its management, unless the provision of entertainment for persons such as are mentioned in sub- paragraph (a) and (b) above is incidental to its provision for others. 4 For the purposes of this article “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) above or on behalf of any government or public authority outside the United Kingdom and the Isle of Man. 6 Where a taxable person constructing, or effecting any works to a building, in either case for the purpose of making a grant of a major interest in it or any part of it or its site which is of a description in Schedule 8 to the Act, incorporates goods other than building materials in any part of the building or its site, input tax on the supply ... or importation of the goods shall be excluded from credit under section 25 of the Act. 7 1 Subject to paragraph (2) to (2H) below tax charged on— a the supply (including a letting on hire) to a taxable person; b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . or c the importation by a taxable person, of a motor car shall be excluded from any credit under section 25 of the Act. 2 Paragraph (1) above does not apply where— a the motor car is— i a qualifying motor car; ii supplied (including on a letting on hire) to , ... or imported by, a taxable person; and iii the relevant condition is satisfied; aa the motor car forms part of the stock in trade of a motor manufacturer or a motor dealer; b the supply is a letting on hire of a motor car which is not a qualifying motor car (other than a supply on a letting on hire of a motor car which is not a qualifying motor car by virtue only of the application of paragraph (2C) below, to a person whose supply on a letting on hire prior to 1st August 1995 resulted in the application of that paragraph) ; c the motor car is unused and is supplied to 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 the motor car 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. 2A Subject to paragraph (2B) and (2C) below, for the purposes of paragraph (2)(a) and (b) above a motor car is a qualifying motor car if— a it has never been supplied ... or imported in circumstances in which the VAT on that supply ... or importation was wholly excluded from credit as input tax by virtue of paragraph (1) above; or b a taxable person has elected for it to be treated as such. 2B A taxable person may only elect for a motor car to be treated as a qualifying motor car if it— a is first registered on or after 1st August 1995; b was supplied to, ... or imported by, him prior to that date in circumstances in which the VAT on that supply ... or importation was wholly excluded from credit as input tax by virtue of paragraph (1) above; and c had not been supplied on a letting on hire by him prior to 1st August 1995. 2C A motor car that is supplied ... or imported on or after 1st August 1995 and which would, apart from this paragraph, be a qualifying motor car by virtue of sub-paragraph (a) of paragraph (2A) above shall not be such a car if it was supplied on a letting on hire prior to that date by the person to whom it is supplied or by whom it is ... imported (as the case may be). 2D References in this article to registration of a motor car mean registration in accordance with section 21 of the Vehicle Excise and Registration Act 1994. 2E For the purposes of paragraph (2)(a) above the relevant condition is that the letting on hire, supply ... or importation (as the case may be) is to a taxable person who intends to use the motor car either— a exclusively for the purposes of a business carried on by him, but this is subject to paragraph (2G) below; or b primarily for a relevant purpose. 2F For the purposes of paragraph (2E) above a relevant purpose, in relation to a motor car which is let on hire or supplied to, ... or imported by, a taxable person (as the case may be), is any of the following purposes— 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; or c to use it as a vehicle in which instruction in the driving of a motor car is to be given by him. (2G) A taxable person shall not be taken to intend to use a motor car exclusively for the purposes of a business carried on by him if he intends to— a 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 arms length; or b make it available (otherwise than by letting it on hire) to any person (including, where the taxable person is an individual, himself, or where the taxable person is a partnership, a partner) for private use, whether or not for a consideration. 2H Where paragraph (1) above applies to a supply of a motor car on a letting on hire it shall apply to the tax charged on that supply as if for the word “tax” there were substituted “one half of the tax” . 3 In this article— a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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— i will normally be less than 30 consecutive days; and ii will normally be less than 90 days in any period of 12 months. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Application of this Order in relation to Northern Ireland 8 1 In this Order, references to VAT charged on the importation of goods includes VAT charged under the following provisions of Schedule 9ZB (goods removed to or from Northern Ireland etc.) to the Act— a paragraph 1(3); b paragraph 3(2); and c paragraph 3(4). 2 Schedule 2 to this Order makes separate provision for the disallowance of input tax in relation to acquisitions in Northern Ireland from the EU. Irvine Patnick Gregory Knight Two of the Lords Commissioners of Her Majesty’s Treasury 16th December 1992