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Supplies of immovable goods, etc.
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88.— The Principal Act is amended with effect from 1 July 2008 by inserting the following sections before section 5—
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“Supplies of immovable goods.
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4B.— (1) In this section—
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‘ completed ’, in respect of immovable goods, means that the development of those goods has reached the state, apart from only such finishing or fitting work that would normally be carried out by or on behalf of the person who will use them, where those goods can effectively be used for purposes for which those goods were designed, and the utility services required for those purposes are connected to those goods;
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‘ occupied ’, in respect of immovable goods, means—
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(a) occupied and fully in use following completion where that use is one for which planning permission for the development of those goods was granted, and
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(b) where those goods are let, occupied and fully in such use by the tenant.
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(2) Subject to subsections (3), (5) and (7), tax is not chargeable on the supply of immovable goods—
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(a) that have not been developed,
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(b) being completed immovable goods, the most recent completion of which occurred more than 5 years prior to that supply, and those goods have not been developed within that 5 year period,
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(c) being completed immovable goods that have not been developed since the most recent completion of those goods, where that supply—
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(i) occurs after the immovable goods have been occupied for an aggregate of at least 24 months following the most recent completion of those goods, and
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(ii) takes place after a previous supply of those goods on which tax was chargeable and that previous supply—
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(I) took place after the most recent completion of those goods, and
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(II) was a transaction between taxable persons who were not connected within the meaning of section 7A,
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(d) being a building that was completed more than 5 years prior to that supply and on which development was carried out in the 5 years prior to that supply where—
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(i) such development did not and was not intended to adapt the building for a materially altered use, and
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(ii) the cost of such development did not exceed 25 per cent of the consideration for that supply,
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or
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(e) being a building that was completed within the 5 years prior to that supply where—
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(i) the building had been occupied for an aggregate of at least 24 months following that completion,
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(ii) that supply takes place after a previous supply of the building on which tax was chargeable and that previous supply—
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(I) took place after that completion of the building, and
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(II) was a transaction between taxable persons who were not connected within the meaning of section 7A,
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and
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(iii) if any development of that building occurred after that completion—
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(I) such development did not and was not intended to adapt the building for a materially altered use, and
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(II) the cost of such development did not exceed 25 per cent of the consideration for that supply.
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(3) Where a person supplies immovable goods to another person and in connection with that supply a taxable person enters into an agreement with that other person or with a person connected with that other person to carry out a development in relation to those immovable goods, then—
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(a) the person who supplies the goods shall, in relation to that supply, be deemed to be a taxable person,
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(b) the supply of the said immovable goods shall be deemed to be a supply of those goods to which section 2 applies, and
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(c) subsection (2) does not apply to that supply.
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(4) Section 8(3) does not apply in relation to a person who makes a supply of immovable goods.
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(5) Where a taxable person supplies immovable goods to another taxable person in circumstances where that supply would otherwise be exempt in accordance with subsection (2) then tax shall, notwithstanding subsection (2), be chargeable on that supply, where the supplier and the taxable person to whom the supply is made enter an agreement in writing to opt to have tax chargeable on that supply (in this Act referred to as a ‘joint option for taxation’).
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(6) Where a joint option for taxation is exercised in accordance with subsection (5) then—
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(a) the person to whom the supply is made shall, in relation to that supply, be an accountable person and shall be liable to pay the tax chargeable on that supply as if that person supplied those goods, and
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(b) the person who made the supply shall not be accountable for or liable to pay the said tax.
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(7) (a) Where a taxable person supplies immovable goods to another person in circumstances where that supply would otherwise be exempt in accordance with subsection (2), tax shall, notwithstanding subsection (2), be chargeable on that supply where—
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(i) the immovable goods are buildings designed as or capable of being used as a dwelling,
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(ii) the person who makes that supply is a person who developed the immovable goods in the course of a business of developing immovable goods or a person connected with that person, within the meaning of section 7A, and
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(iii) the person who developed those immovable goods was entitled to a deduction under section 12 for tax chargeable to that person in respect of that person’s acquisition or development of those immovable goods.
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(b) In the case of a building to which this subsection would apply if the building were supplied by the taxable person at any time during the capital goods scheme adjustment period for that building—
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(i) section 12E(6) shall not apply, and
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(ii) notwithstanding section 12E(4) the proportion of total tax incurred that is deductible by that person shall be treated as the initial interval proportion of deductible use.
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Transitional measures for supplies of immovable goods.
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4C.— (1) This section applies to—
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(a) immovable goods which are acquired or developed by a taxable person prior to 1 July 2008 and have not been disposed of by that taxable person prior to that date, until such time as those goods have been disposed of by that taxable person on or after that date, and
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(b) an interest in immovable goods within the meaning of section 4 other than a freehold interest or a freehold equivalent interest, created by a taxable person prior to 1 July 2008 and held by a taxable person on 1 July 2008.
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(2) In the case of a supply of immovable goods to which subsection (1)(a) applies, being completed immovable goods within the meaning of section 4B,—
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(a) where the person supplying those goods had no right to deduction under section 12 in relation to the tax chargeable on the acquisition or development of those goods prior to 1 July 2008, and
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(b) if any subsequent development of those immovable goods occurs on or after 1 July 2008—
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(i) that development does not and is not intended to adapt the immovable goods for a materially altered use, and
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(ii) the cost of that development does not exceed 25 per cent of the consideration for that supply,
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then, subject to section 4B(3), that supply is not chargeable to tax but a joint option for taxation may be exercised in respect of that supply in accordance with section 4B(5) and that tax is payable in accordance with section 4B(6).
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(3) Where a person referred to in subsection (1)—
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(a) acquired, developed or has an interest in immovable goods to which this section applies,
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(b) was entitled to deduct tax, in accordance with section 12 on that person’s acquisition or development of those goods, and
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(c) creates a letting of those immovable goods to which paragraph (iv) of the First Schedule applies,
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then, that person shall calculate an amount in accordance with the formula in section 4(3)(ab) and that amount shall be payable as if it were tax due by that person in accordance with section 19 for the taxable period in which that letting takes place.
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(4) An assignment or surrender of an interest in immovable goods to which subsection (1)(b) applies is deemed to be a supply of immovable goods for the purposes of this Act for a period of 20 years from the creation of the interest or the most recent assignment or surrender of that interest before 1 July 2008, whichever is the later.
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(5) If a person makes a supply of immovable goods to which this section applies and tax is chargeable on that supply and that person was not entitled to deduct all the tax charged to that person on the acquisition or development of those immovable goods that person shall be entitled to make the appropriate adjustment that would apply under section 12E(7)(a) as if the capital goods scheme applied to that transaction.
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(6) In the case of an assignment or surrender of an interest in immovable goods referred to in subsection (4)—
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(a) tax shall be chargeable if the person who makes the assignment or surrender was entitled to deduct in accordance with section 12 any of the tax chargeable on the acquisition of that interest, or the development of those immovable goods, and
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(b) tax shall not be chargeable where the person who makes the assignment or surrender had no right to deduction under section 12 on the acquisition of that interest or the development of those immovable goods, but a joint option for taxation of that assignment or surrender may be exercised.
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(7) (a) Notwithstanding section 10, the amount on which tax is chargeable on a taxable assignment or surrender to which subsection (6) applies shall be the amount calculated in accordance with the formula in paragraph (b) divided by the rate as specified in section 11(1)(d) expressed in decimal form.
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(b) The amount of tax due and payable in respect of a taxable assignment or surrender to which subsection (6) applies is an amount calculated in accordance with the following formula:
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T x N
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Y
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where—
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T is the total tax incurred referred to in subsection (11)(d),
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N is the number of full intervals plus one, that remain in the adjustment period referred to in subsection (11)(c), at the time of the assignment or surrender,
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Y is the total number of intervals in that adjustment period for the person making the assignment or surrender,
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and section 4(8) shall apply to that tax.
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(8) (a) Where an interest in immovable goods referred to in subsection (6) is assigned or surrendered during the adjustment period and tax is payable in respect of that assignment or surrender, then the person who makes the assignment or surrender shall issue a document to the person to whom the interest is being assigned or surrendered containing the following information:
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(i) the amount of tax due and payable on that assignment or surrender, and
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(ii) the number of intervals remaining in the adjustment period.
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(b) Where paragraph (a) applies, the person to whom the interest is assigned or surrendered shall be a capital goods owner for the purpose of section 12E in respect of the capital good being assigned or surrendered, and shall be subject to the provisions of that section and for this purpose—
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(i) the adjustment period shall be the period referred to in subsection (11)(c) as correctly specified on the document referred to in paragraph (a),
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(ii) the total tax incurred shall be the amount of tax referred to in subsection (11)(d) as correctly specified in the document referred to in paragraph (a), and
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(iii) the initial interval shall be a period of 12 months beginning on the date on which the assignment or surrender occurs.
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(9) (a) Where a person cancels an election to be an accountable person in accordance with section 8(5A) then, in respect of the immovable goods which were used in supplying the services for which that person made that election, section 12E does not apply if those immovable goods are held by that person on 1 July 2008 and are not further developed after that date.
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(b) Section 8(5A) does not apply to immovable goods acquired or developed on or after 1 July 2008.
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(10) In the application of section 12E to immovable goods and interests in immovable goods to which this section applies, subsections (4), (5) and (6) of that section shall be disregarded in respect of the person who owns those immovable goods or holds an interest in those immovable goods on 1 July 2008.
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(11) For the purposes of applying section 12E to immovable goods, or interests in immovable goods to which this section applies—
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(a) any interest in immovable goods to which this section applies shall be treated as a capital good,
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(b) any person who has an interest in immovable goods to which this section applies shall be treated as a capital goods owner, but shall not be so treated to the extent that the person has a reversionary interest in those immovable goods if those goods were not developed, by, on behalf of, or to the benefit of that person,
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(c) the period to be treated as the adjustment period in respect of immovable goods to which this section applies is—
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(i) in the case of the acquisition of the freehold interest or freehold equivalent interest in those immovable goods, 20 years from the date of that acquisition,
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(ii) in the case of the creation of an interest in those immovable goods, 20 years or, if the interest when it was created was for a period of less than 20 years, the number of full years in that interest when created, whichever is the shorter, or
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(iii) in the case of the assignment or surrender of an interest in immovable goods the period remaining in that interest at the time of the assignment or surrender of that interest or 20 years, whichever is the shorter,
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but where the immovable goods have been developed since the acquisition of those immovable goods or the creation of that interest, 20 years from the date of the most recent development of those goods,
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(d) the amount of tax charged, or the amount of tax that would have been chargeable but for the application of sections 3(5)(b)(iii) or 13A, to the person treated as the capital goods owner on the acquisition of, or the most recent development of, the capital goods shall be treated as the total tax incurred,
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(e) the total tax incurred divided by the number of years in the adjustment period referred to in paragraph (c) shall be treated as the base tax amount,
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(f) each year in the adjustment period referred to in paragraph (c) shall be treated as an interval,
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(g) the first 12 months of the adjustment period referred to in paragraph (c) shall be treated as the initial interval,
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(h) the second year of the adjustment period referred to in paragraph (c) shall be treated as the second interval,
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(i) each year following the second year in the adjustment period referred to in paragraph (c) shall be treated as a subsequent interval,
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(j) the amount which shall be treated as the total reviewed deductible amount shall be the amount of the total tax incurred as provided for in paragraph (d) less—
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(i) any amount of the total tax incurred which was charged to the person treated as the capital goods owner but which that owner was not entitled to deduct in accordance with section 12,
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(ii) any amount accounted for in accordance with section 12D(4) by the person treated as the capital goods owner in respect of a transfer of the goods to that owner prior to 1 July 2008, and
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(iii) any tax payable in accordance with subsection (3) or section 4(3)(ab) by the person treated as the capital goods owner,
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(k) the amount referred to in paragraph (d) less the amount referred to in paragraph (j) shall be treated as the non-deductible amount,
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and for the purposes of applying paragraphs (f), (h) and (i) ‘ year ’ means each 12 month period in the adjustment period, the first of which begins on the first day of the initial interval referred to in paragraph (g).
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(12) Where a taxable person acquires immovable goods on or after 1 July 2007, then, notwithstanding subsection (10), section 12E(4) shall apply and, notwithstanding subsection (11)(j), the total reviewed deductible amount shall have the meaning assigned to it by section 12E. However this subsection does not apply where a taxable person has made an adjustment in accordance with section 12(4)(f) in respect of those goods.”.
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