9. Adjustments for returned goods, discounts and price alterations

(1) Paragraphs (2) to (4) apply where, in a case in which section 39(2) of the Act applies and section 67(5) of the Act does not apply, by reason of the allowance of discount, a reduction in price or the return of goods other than the return of goods in an early termination of a hire purchase agreement—

(a) the consideration exclusive of tax actually received by an accountable person in respect of the supply by the accountable person of any goods or services is less than the amount on which tax has become chargeable in respect of such supply, or

(b) no consideration is actually received.

(2) The amount of the deficiency in respect of any supply shall be ascertained by deducting from the amount on which tax has become chargeable in respect of such supply, the consideration actually received exclusive of tax.

(3) (a) Subject to subparagraph (b), the sum of the deficiencies ascertained

in accordance with paragraph (2), incurred in each taxable period and relating to consideration chargeable at each of the various rates of tax (including the zero rate) specified in section 46(1) of the Act, shall be deducted from the amounts ascertained in accordance with Chapter 1 of Part 5 of the Act which would otherwise be chargeable with tax at each of those rates, and the net amounts as so ascertained shall be the amounts on which tax is chargeable for the taxable period during which the deficiencies are ascertained.

(b) For the purposes of subparagraph (a), where the sum of the deficiencies as ascertained in accordance with that subparagraph in relation to tax chargeable at any of the rates so specified in section 46(1) of the Act exceeds the amount on which, but for this Regulation—

(i) tax would be chargeable at that rate, or

(ii) no tax is chargeable at that rate,

then, the tax appropriate to the excess or to the sum of the deficiencies, if no tax is chargeable, shall be treated as tax deductible in accordance with Chapter 1 of Part 8 of the Act for that taxable period.

(4) (a) Where, in accordance with Chapter 2 of Part 9 of the Act, a credit note is issued by an accountable person in respect of an adjustment under this Regulation, then the accountable person to whom the credit note is issued shall reduce the amount which would otherwise be deductible under Chapter 1 of Part 8 of the Act for the taxable period during which the credit note is issued (in this paragraph referred to as the “tax deduction”) by the appropriate amount of tax shown thereon (in this paragraph referred to as the “tax reduction”).

(b) Where the tax reduction exceeds the tax deduction, then the excess shall be carried forward and deducted from the tax deductible under Chapter 1 of Part 8 of the Act for the next taxable period and so on until the tax reduction is exhausted.

(5) (a) Where, in accordance with section 68(2)(b) of the Act, a farmer credit note is issued by a flat-rate farmer, then the accountable person to whom the credit note is issued shall reduce the amount which would otherwise be deductible under section 59(2)(o) of the Act for the taxable period during which the farmer credit note is issued (in this paragraph referred to as the “flat-rate deduction”) by the amount of the appropriate flat-rate addition shown thereon (in this paragraph referred to as the “flat-rate reduction”).

(b) Where the flat-rate reduction exceeds the flat-rate deduction, the excess shall be carried forward and deducted from the amount deductible under section 59(2)(o) of the Act for the next taxable period and so on until the flat-rate reduction is exhausted.