17. Apportionment

(1) In this Regulation—

“authorised officer” means a person authorised for the purposes of section 108 of the Act;

“final accounting year” means the period from the end of the previous accounting year to the date that a person ceases to be an accountable person;

“review period” means a period consisting of all the taxable periods that end during an accounting year.

(2) (a) Where an accountable person deducts, in accordance with sections 59(2) and 61 of the Act, a proportion of the tax borne or payable on the accountable person’s acquisition of dual-use inputs for a taxable period, then that proportion of tax deductible by that person for a taxable period is—

(i) the proportion which—

(I) correctly reflects the extent to which the dual-use inputs are used for the purposes of that person’s deductible supplies or activities, and

(II) has due regard to the range of that person’s total supplies and activities,

for that taxable period,

(ii) the proportion which was calculated as being the proportion of tax deductible for the review period immediately preceding the taxable period in question,

(iii) the proportion which that person estimates will—

(I) correctly reflect the extent to which the dual-use inputs will be used for the purposes of that person’s deductible supplies or activities, and

(II) have due regard to the range of that person’s total supplies and activities,

for the review period in which that taxable period ends, or

(iv) any other proportion of tax deductible which is determined in accordance with paragraph (2)(c).

(b) Where an accountable person estimates a proportion of tax deductible for a taxable period in accordance with subparagraph (a)(iii), then the accountable person is required to submit, at the same time as the return required to be furnished in accordance with section 76 or 77 of the Act for the taxable period in question, details setting out the basis for that estimate to the office of the Commissioners that would normally deal with the examination of the records kept by that person in accordance with Chapter 7 of Part 9 of the Act.

(c) If an authorised officer is satisfied that the proportion of tax deductible, estimated in accordance with subparagraph (a)(iii)—

(i) does not correctly reflect the extent to which the dual-use inputs will be used for the purposes of the accountable person’s deductible supplies or activities, and

(ii) does not have due regard to the range of that person’s total supplies and activities for the review period in which the taxable period ends,

then that officer may direct that accountable person to use a proportion of tax deductible in accordance with clause (i) or (ii) of subparagraph (a) or any other appropriate proportion which that officer agrees with that person.

(3) (a) An accountable person who deducts, in accordance with sections 59(2) and 61 of the Act, a proportion of the tax borne or payable on the accountable person’s acquisition of dual-use inputs is required, at the end of each review period—

(i) to calculate the proportion of tax deductible for that review period, and

(ii) to adjust, if necessary in accordance with subparagraph (b), the amount of tax deducted in that review period to ensure that it correctly reflects the extent to which the dual-use inputs were used for the purposes of that person's deductible supplies or activities and had due regard to the range of that person’s total supplies and activities for that review period.

(b) Subject to subparagraph (c), any necessary adjustment under subparagraph (a) is required to be made by way of an increase or decrease, in accordance with the circumstances, in the amount of tax deductible by the accountable person, for—

(i) the taxable period immediately following the end of the review period, or

(ii) such later taxable period as is agreed between the accountable person and an authorised officer.

(c) Where the adjustment under subparagraph (b) relates to the final accounting year of the accountable person concerned, then any necessary adjustment is required to be made by way of an increase or decrease in the amount of tax deductible for the taxable period in which that final accounting year ends. Any such adjustment is required to be made in the return to be furnished by the accountable person in accordance with section 76 or 77 of the Act in respect of the appropriate taxable period.

(d) Any increase or decrease in the amount of tax deductible resulting from an adjustment of tax deductible that is made in accordance with this paragraph is to be disregarded in calculating the proportion of tax deductible for the review period in which that adjustment was made.

(4) Where in accordance with paragraph (3) an accountable person adjusts the amount of tax deductible for a review period and, subsequent to that adjustment, it is established that that adjustment was incorrect, then section 114 of the Act does not apply to any additional liability for tax arising out of the correction of that adjustment, but only if—

(a) that person, or any person acting on his or her behalf, did not act fraudulently or negligently in relation to that adjustment,

(b) that person submitted, by the due date for submission of the return referred to in paragraph (3)(c), details setting out the basis on which the adjustment was made to the office of the Commissioners which would normally deal with the examination of the records kept by that person in accordance with Chapter 7 of Part 9 of the Act, and

(c) that additional liability is not the subject of an assessment of tax under section 111 of the Act.