18. The principal Regulations are amended by inserting, immediately after regulation 90, the following Part:“PART XIIA | REVERSE CHARGE ADJUSTMENTS |
90A.—(1) In this Part —| “claim” means a claim made to the Comptroller under regulation 90B, in accordance with regulation 90C, for a refund in respect of a reverse charge supply; |
| “claimant” means a recipient under section 14(2) of the Act, that makes a claim; |
“outstanding consideration” means —| (a) | if at the time of the claim the claimant has made no payment to the overseas supplier by way of the consideration for the services in fact supplied by the overseas supplier to him, an amount equal to the amount of the consideration owing to the overseas supplier; or | | (b) | if at that time the claimant has made a payment or payments to the overseas supplier by way of the consideration for the services in fact supplied by the overseas supplier to him, an amount by which the payment (or the aggregate of the payments) is exceeded by the amount of the consideration for such supply; |
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| “overseas supplier” means the person or branch mentioned in section 14(1)(a) of the Act or the member of a group mentioned in section 30 of the Act, that makes a supply to a recipient which gives rise to a reverse charge supply; |
| “payment” means any payment or part-payment which is made by the claimant to the overseas supplier by way of consideration for the supply by the overseas supplier to him, regardless of whether such payment is in full settlement of the amount owing by the claimant to the overseas supplier or not; |
| “reverse charge adjustment account” has the same meaning as in regulation 90E(3). |
| (2) Sections 11C and 93(3) of the Act apply for determining the time when a reverse charge supply is to be treated as taking place for the purposes of this Part. |
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| Adjustment for reverse charge supply |
90B. Subject to these Regulations, a claimant is entitled, on making a claim to the Comptroller, to a refund of the difference between the amount of output tax chargeable, and the amount of input tax claimable by him, on a reverse charge supply by reference to the outstanding consideration, where —| (a) | the claimant has accounted for and paid tax on the reverse charge supply; | | (b) | the whole or any part of the consideration has not been paid by the claimant to the overseas supplier for the supply made by the overseas supplier to the claimant, for a period of more than 12 months since the date the reverse charge supply was treated as taking place; | | (c) | the value of the reverse charge supply is equal to or less than its open market value; | | (d) | the claim is made within a period of 5 years commencing on the day the reverse charge supply was treated as taking place, or such longer period as the Comptroller may allow; and | | (e) | the Comptroller is satisfied that there is a genuine commercial reason for the failure of the claimant to make payment of the whole or part of the consideration to the overseas supplier for the reverse charge supply. |
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| Making claim to Comptroller |
90C.—(1) Except as the Comptroller may otherwise allow, the claimant must make the claim by including the relevant amounts of refund in the appropriate box or boxes (as the case may be) on his return for the prescribed accounting period in which the claim is made. | (2) If, at the time the claimant becomes entitled to make the claim, he is no longer required to make returns to the Comptroller, he must make a claim to the Comptroller in such form and manner as the Comptroller may determine. |
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| Evidence required to support claim |
90D. Except as the Comptroller may otherwise allow, the claimant must, at the time he makes the claim, hold in respect of the reverse charge supply that is the subject of the claim —| (a) | a copy of any invoice or other document provided by the overseas supplier that made the supply to the claimant, showing the time, nature and overseas supplier of, and the consideration for, the supply made by the overseas supplier; | | (b) | records or other document showing that the claimant has accounted for and paid the output tax on the reverse charge supply; | | (c) | records or other document showing any amount of input tax claimed by the claimant; | | (d) | records or other document showing that the consideration has not been paid in full by the claimant to the overseas supplier; and | | (e) | records or other document showing that all reasonable efforts have been taken by the claimant to resolve any dispute over the consideration for the supply in fact made. |
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| Records to be kept for claim |
90E.—(1) A claimant must keep a record of the claim made.(2) Except as the Comptroller may otherwise allow, the record must consist of the following information:| (a) | in respect of the reverse charge supply that is the subject of the claim —| (i) | the amount of output tax chargeable and any corresponding amount of input tax claimable; | | (ii) | the prescribed accounting period in which the output tax chargeable was accounted for and paid to the Comptroller, and the input tax was claimed; | | (iii) | the date and number of any invoice issued in relation to, or (where there is no such invoice) such information and documents necessary to identify the time, nature and overseas supplier of, the supply made by the overseas supplier that gave rise to the reverse charge supply; and | | (iv) | the amount of any payment made for the supply made by the overseas supplier; |
| | (b) | the amount of the outstanding consideration to which the claim relates; | | (c) | the amount of the claim; | | (d) | the prescribed accounting period in which the claim was made. |
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| (3) The records must be kept in the form of an account to be known as the “reverse charge adjustment account”. |
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| Preservation of documents and records and duty to produce |
90F.—(1) Except as the Comptroller may otherwise allow, the claimant must preserve the documents, invoices and records which he holds or keeps in accordance with regulations 90D and 90E for a period of not less than 3 years starting on the date of the claim.| (2) Upon demand made by an authorised person, the claimant must produce or cause to be produced any such documents, invoices and records for inspection by the authorised person and permit him to remove them at a reasonable time and for a reasonable period. |
| (3) Nothing in this regulation is to be construed as derogating from any requirement under the Act to preserve any document, invoice or record for a period exceeding 3 years. |
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| Reversal of adjustment made under claim |
90G.—(1) Where a claimant —| (a) | has been given a refund pursuant to a claim; and | | (b) | subsequently either —| (i) | makes a payment to the overseas supplier for the supply made by the overseas supplier to him within the period of 5 years from the end of the prescribed accounting period in which the tax on the reverse charge supply was accounted for; or | | (ii) | makes a payment to the overseas supplier which, by virtue of regulation 90H, is treated as attributed to the supply, |
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| the claimant must repay to the Comptroller an amount calculated in accordance with the formula |
| (A) | A is the amount of the refund, or (if any reversal under this regulation was previously made) the balance of the refund; | | (B) | B is the amount of payment so made or attributed; and | | (C) | C is the amount of the consideration for the supply owing by the claimant to the overseas supplier immediately before the payment. |
| (2) The claimant must repay to the Comptroller the amount mentioned in paragraph (1) by including the relevant amounts of refund in the appropriate box or boxes on his return for the prescribed accounting period in which the payment mentioned in paragraph (1)(b) is made. |
| (3) Except as the Comptroller may otherwise allow, where the claimant fails to comply with the requirements of regulation 90D, 90E or 90F, the claimant must repay to the Comptroller the amount of the refund obtained to which the failure to comply relates; and he must repay the amount by including the relevant amounts of output tax and input tax in the appropriate box or boxes on his return for the prescribed accounting period which the Comptroller designates for that purpose. |
| (4) If, at the time the claimant is required to repay any amount, he is no longer required to make returns to the Comptroller, the claimant must repay the amount to the Comptroller within one month after he makes the payment mentioned in paragraph (1)(b), and in such form and manner as the Comptroller may determine. |
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90H.—(1) Where —| (a) | more than one supply of services was made by the same overseas supplier to a person, with one or more supply giving rise to a reverse charge supply; | | (b) | a payment is made by the person to the overseas supplier for those supplies; and | | (c) | at the time of the payment, the person is a claimant in relation to one or more of those supplies, |
| then the payment is to be attributed to each of those supplies in accordance with paragraphs (2), (3) and (4). |
| (2) The payment must be attributed to the supply which is the earliest in time and then, if not wholly attributed to that supply, to the other supplies in the order of the dates on which they were made. |
| (3) Attribution under paragraph (2) must not be made to any supply made by the overseas supplier if the payment was allocated to that supply by the claimant at the time of payment and the consideration for that supply was paid in full. |
(4) Where —| (a) | the earliest supply and other supplies made by the overseas supplier to which the whole of the payment could be attributed under this regulation occur on one day; or | | (b) | the supplies made by the overseas supplier to which the balance of the payment could be attributed under this regulation occur on one day, |
| the payment must be attributed to those supplies by applying for each supply the formula |
| (i) | A is the payment made by the claimant to the overseas supplier; | | (ii) | B is the amount of the consideration not paid to the overseas supplier for the supply in question immediately before the payment in paragraph (1); and | | (iii) | C is the total consideration not paid to the overseas supplier for the supplies mentioned in sub‑paragraph (a) or (b) (as the case may be) immediately before the payment in paragraph (1). |
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90I.—(1) This regulation applies for the purpose of ascertaining whether, and to what extent, the consideration is treated as not paid by the claimant to the overseas supplier for a supply made by the overseas supplier to the claimant.| (2) The whole or any part of the consideration for the supply is treated as not paid by the claimant to the overseas supplier when details relating to that fact are entered into the reverse charge adjustment account of the claimant, regardless of whether the claim can be made in relation to that supply at that time. |
| (3) Where the overseas supplier owes an amount of money to the claimant which can be set‑off against the outstanding consideration, the consideration treated as not paid is to be reduced by the amount so owed. |
| (4) Where the overseas supplier holds in relation to the claimant an enforceable security, the consideration treated as not paid is to be reduced by the value of that security.”. |
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