Finance Act, 1987

Amendment of section 12 (deduction for tax borne or paid) of Principal Act.

41.—Section 12 of the Principal Act is hereby amended—

(a) by the substitution of the following subsection for subsection (1) (inserted by the Act of 1978):

“(1) (a) In computing the amount of tax payable by him in respect of a taxable period, a taxable person may, insofar as the goods and services are used by him for the purposes of his taxable supplies or of any of the qualifying activities, deduct—

(i) the tax charged to him during the period by other taxable persons by means of invoices, prepared in the manner prescribed by regulations, in respect of supplies of goods or services to him,

(ii) in respect of goods imported by him in the period, the tax paid by him or deferred as established from the relevant customs documents kept by him in accordance with section 16(3),

(iii) the tax chargeable during the period in respect of goods treated as supplied by him in accordance with section 3 (1) (e),

(iv) the tax chargeable during the period in respect of services treated as supplied by him for consideration in the course or furtherance of his business in accordance with section 5 (3) (d),

(v) the tax chargeable during the period, being tax for which he is liable by virtue of section 5 (3A), in respect of services received by him,

(vi) if so provided by regulations and subject to and in accordance with any such regulations, the amount of tax, as defined, included in the consideration payable for specified second-hand goods or categories of second-hand goods acquired, in circumstances other than those described in the proviso to section 10 (2), for resale from a person who is not a taxable person or from a taxable person where the goods were used by the said taxable person for the purposes of a business carried on by him, but in relation to the acquisition or application of which he had borne tax and the goods were of such a kind or were used in such circumstances that no part of the said tax was deductible under this section,

(vii) the tax chargeable during the period, being tax for which he is liable by virtue of section 8(2), in respect of services received by him, and

(viii) tax charged to him during the period by means of invoices prepared in the manner prescribed by regulations and issued to him in accordance with section 12A.

(b) In paragraph (a) ‘qualifying activities’ means—

(i) transport outside the State of passengers and their accompanying baggage,

(ii) services specified in paragraph (i), (ix) (b), (c) or (d), or (xi), of the First Schedule, supplied—

(I) outside the Community, or

(II) directly in connection with the export of goods to a place outside the Community, and

(iii) supplies of goods or services outside the State which would be taxable supplies if made in the State.”,

(b) in subsection (3) (a) (inserted by the Act of 1978) by—

(i) the substitution for “in subsection (1), a deduction of tax under that subsection” of “in this section, a deduction of tax under this section”,

(ii) the insertion, after subparagraph (iii), of “or”, and

(iii) the deletion of all of that part of the said subsection (3)(a) which follows subparagraph (iv),

and the said subsection (3)(a), as so amended, is set out in the Table to this paragraph,

TABLE

(3) (a) Notwithstanding anything in this section, a deduction of tax under this section shall not be made if, and to the extent that, the tax relates to—

(i) the provision of food or drink, or accommodation or other personal services, for the taxable person, his agents or his employees, except to the extent, if any, that such provision constitutes a supply of services in respect of which he is accountable for tax,

(ii) entertainment expenses incurred by the taxable person, his agents or his employees,

(iii) the acquisition (including hiring) of motor vehicles otherwise than as stock-in-trade or for the purposes of a business which consists in whole or part of the hiring of motor vehicles or for use, in a driving school business, for giving driving instruction, or

(iv) the purchase of petrol otherwise than as stock-in-trade.,

and

(c) by the substitution of the following subsection for subsection (4):

“(4) Where goods or services (not being goods or services on the acquisition of which a deduction of tax shall not, in accordance with subsection (3), be made) are used by a taxable person for the purposes of supplies or activities in relation to which tax is deductible in accordance with this section and also for the purposes of other supplies or activities, such proportion only of tax shall be deductible as is attributable to those first-mentioned supplies or activities and the said proportion shall be determined in accordance with regulations.”.