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Amendment of section 12 (deduction for tax borne or paid) of Principal Act.
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112.—Section 12 of the Principal Act is amended—
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(a) by the insertion in paragraph (a) of subsection (1) of the following subparagraph after subparagraph (via) (inserted by the Act of 1999):
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“(vib) the residual tax referred to in section 12C, being residual tax contained in the price charged to the taxable person for the purchase of agricultural machinery (within the meaning of section 12C), by means of documents issued to that person during the period in accordance with section 12C(1B),”,
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and
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(b) by the substitution of the following for subsection (4):
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“(4) (a) In this subsection—
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‘deductible supplies or activities’ means the supply of taxable goods or taxable services, or the carrying out of qualifying activities as defined in subsection (1)(b);
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‘dual-use inputs’ means goods or services (other than goods or services on the purchase or acquisition of which, by virtue of subsection (3), a deduction of tax shall not be made) which are not used solely for the purposes of either deductible supplies or activities or non-deductible supplies or activities;
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‘non-deductible supplies or activities’ means the supply of goods or services or the carrying out of activities other than deductible supplies or activities;
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‘total supplies and activities’ means deductible supplies or activities and non-deductible supplies or activities.
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(b) Where a taxable person engages in both deductible supplies or activities and non-deductible supplies or activities then, in relation to that person’s acquisition of dual-use inputs for the purpose of that person’s business for a period, that person shall be entitled to deduct in accordance with subsection (1) only such proportion of tax, borne or payable on that acquisition, which is calculated in accordance with the provisions of this subsection and regulations, as being attributable to that person’s deductible supplies or activities and such proportion of tax is, for the purposes of this subsection, referred to as the ‘proportion of tax deductible’.
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(c) For the purposes of this subsection and regulations, the proportion of tax deductible by a taxable person for a period shall be calculated on any basis which results in a proportion of tax deductible which correctly reflects the extent to which the dual-use inputs are used for the purposes of that person’s deductible supplies or activities and has due regard to the range of that person’s total supplies and activities.
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(d) The proportion of tax deductible may be calculated on the basis of the ratio which the amount of a person’s tax-exclusive turnover from deductible supplies or activities for a period bears to the amount of that person’s tax-exclusive turnover from total supplies and activities for that period but only if that basis results in a proportion of tax deductible which is in accordance with paragraph (c).
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(e) Where it is necessary to do so to ensure that the proportion of tax deductible by a taxable person is in accordance with paragraph (c), a taxable person shall—
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(i) calculate a separate proportion of tax deductible for any part of that person’s business, or
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(ii) exclude, from the calculation of the proportion of tax deductible, amounts of turnover from incidental transactions by that person of the type specified in paragraph (i) of the First Schedule or amounts of turnover from incidental transactions by that person in immovable goods.
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(f) The proportion of tax deductible as calculated by a taxable person for a taxable period may be adjusted in accordance with regulations, if, for the accounting period in which the taxable period ends, that proportion does not correctly reflect the extent to which the dual-use inputs are used for the purposes of that person’s deductible supplies or activities or does not have due regard to the range of that person’s total supplies and activities.”.
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