Commentary

B3.393 Plant and machinery allowances—treatment of additional VAT liabilities and rebates

Business tax
Business tax | Commentary

B3.393 Plant and machinery allowances—treatment of additional VAT liabilities and rebates

Business tax | Commentary

B3.393 Plant and machinery allowances—treatment of additional VAT liabilities and rebates

For the purposes of the provisions described here, the terms 'additional VAT liability' and 'additional VAT rebate' have the meaning described in B3.103. The time a person incurs an additional VAT liability or an additional VAT rebate is made to a person is as described in B3.104, as is the chargeable period in which a liability or rebate accrues1.

Additional VAT liability

An additional VAT liability may be treated as further qualifying expenditure if the following conditions are met:

  1.  

    •     a person has incurred qualifying expenditure ('the original expenditure)

  2.  

    •     an additional VAT liability is incurred in respect of the original expenditure, and

  3.  

    •     the plant or machinery is still provided for the purposes of the qualifying activity when the additional VAT liability is incurred2

If the conditions are met, the additional VAT liability is treated as further qualifying expenditure in respect of the plant or machinery, which may be taken into account in the chargeable period in which the additional VAT liability accrues3.

If the original expenditure also attracted first-year allowances or the annual investment allowance, the additional VAT liability may qualify for first-year allowances or the annual investment allowance as well. The additional VAT liability is regarded as the same type of first-year qualifying expenditure as the original expenditure, or as annual investment allowance qualifying expenditure incurred on the same plant or machinery as the original expenditure4. The same rates of first-year allowances (see B3.330) apply for the additional VAT

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