Finance Act 1991

11(1)In section 75 of that Act (connected persons etc) in subsection (1) (provision by purchase of machinery or plant)—

(a)after the words “in respect of the expenditure” there shall be inserted the words “or any additional VAT liability incurred in respect of it”; and

(b)for the words “so much (if any) of the expenditure” there shall be substituted the words “so much (if any) of the aggregate of the expenditure and any such additional VAT liability”.

(2)In subsection (2) of that section (contracts under which a person will or may become the owner of machinery or plant)—

(a)after the words “so far as relating to that machinery or plant” there shall be inserted the words “or in respect of any additional VAT liability incurred by him in respect of any such expenditure”; and

(b)for the words “so much (if any) of the expenditure” there shall be substituted the words “so much (if any) of the aggregate of the expenditure and any such additional VAT liability”.

(3)In subsection (3) of that section (assignment of benefit of such contracts)—

(a)after the words “consideration for the assignment” there shall be inserted the words “or in respect of any additional VAT liability incurred by him in respect of any such expenditure”; and

(b)for the words “so much (if any) of the assignee’s expenditure” there shall be substituted the words “so much (if any) of the aggregate of the assignee’s expenditure and any such additional VAT liability”.

(4)In section 76 of that Act (extension of section 75) after subsection (2) (provision for open market value etc to be brought into account where there is no disposal value) there shall be inserted—

“(2A)In any case where—

(a)section 75(1) has effect with the modification specified in paragraph (a) of subsection (2) above, but

(b)the open market value of the machinery or plant in question is determined for the purposes of those provisions inclusive of value added tax,

section 75(1) as so modified shall have effect with the omission of the words “the aggregate of” and “and any such additional VAT liability”.

(2B)For the purposes of paragraphs (b) and (c) of subsection (2) above—

(a)any additional VAT liability incurred by the seller or, as the case may be, any person connected with him in respect of capital expenditure incurred on the provision of the machinery or plant shall be regarded as capital expenditure incurred on the provision of the machinery or plant, and

(b)any additional VAT rebate made to the seller or, as the case may be, any person connected with him in respect of any such expenditure shall be regarded as reducing the amount of capital expenditure so incurred by him,

to the extent that the liability or rebate in question would not, apart from this subsection, fall to be so regarded.”

(5)In subsection (4) of that section (application of subsections (2) and (3) in relation to section 75(2) and (3)) for the words “Subsections (2) and (3)” there shall be substituted the words “Subsections (2), (2A), (2B) and (3)”.