25. Determination of tax due by reference to moneys received

(1) In this Regulation—

“moneys received basis of accounting” means the method of determining, in accordance with section 80(1) of the Act, the amount of tax which becomes due by an accountable person;

“turnover from taxable supplies”, in relation to any period, means the total of the amounts on which tax is chargeable for that period at any of the rates specified in section 46(1) of the Act.

(2) For the purposes of section 80(1)(a) of the Act and this Regulation, supplies to persons who are not registered persons shall be deemed to include any supply to an accountable person where the accountable person is not entitled to claim, under Chapter 1 of Part 8 of the Act, a full deduction of the tax chargeable in relation to that supply.

(3) (a) An application by an accountable person (referred to in this Regulation as the “applicant”) for authorisation to use the moneys received basis of accounting is required to be made in writing to the Commissioners and to include—

(i) the applicant’s full name and address,

(ii) the applicant’s registration number (if any),

(iii) the nature of the business activities carried on by the applicant.

(b) An applicant who claims eligibility under section 80(1)(a) of the Act is required to include in the application made in accordance with this paragraph particulars of—

(i) the percentage of the applicant’s turnover from taxable supplies, if any, which related to supplies to persons who are not registered persons—

(I) in the period of 12 months ended on the last day of the taxable period prior to the application, or

(II) in the period from the commencement of his or her business activities to the last day of the taxable period referred to in subclause (I),

whichever is the shorter, and

(ii) the applicant’s estimate of the percentage of his or her turnover from taxable supplies which will relate to supplies to persons who are not registered persons in the period of 12 months commencing with the beginning of the taxable period during which the application is made.

(c) An applicant who claims eligibility under section 80(1)(b) of the Act is required to include in the application made in accordance with this paragraph particulars of—

(i) the amount of the applicant’s turnover from taxable supplies in the period of 12 months ended on the last day of the taxable period prior to the application, and

(ii) the applicant’s estimate of his or her turnover from taxable supplies in the period of 12 months commencing with the beginning of the taxable period during which the application is made.

(4) Where the Commissioners consider that a person satisfies the requirements of section 80(1) of the Act, they shall authorise the person, by notice in writing, to use the moneys received basis of accounting subject to this Regulation. An authorisation given for the purposes of section 80(1) of the Act shall have effect from the commencement of the taxable period during which it is given or from such other date as may be specified in the authorisation.

(5) (a) An authorisation of any person for the purposes of section 80(1) of the Act does not apply to tax chargeable on any supply where the person to whom or to whose order the supply is made is a person connected to that authorised person.

(b) For the purposes of this paragraph any question of whether a person is connected with another person shall be determined in accordance with the following:

(i) a person is connected with an individual if that person is the individual's spouse ^[1]>or civil partner^<[1], or is a relative, or the spouse ^[2]>or civil partner^<[2] of a relative, of the individual or of the individual's spouse ^[1]>or civil partner^<[1];

(ii) a person is connected with any person with whom he or she is in partnership, and with the spouse ^[2]>or civil partner^<[2] or a relative of any individual with whom he or she is in partnership;

(iii) subject to subparagraphs (iv) and (v), a person is connected with another person if he or she has control over that other person, or if the other person has control over the first-mentioned person, or if both persons are controlled by another person or persons;

(iv) a body corporate is connected with another person if that person, or persons connected with him or her, have control of it, or the person and persons connected with him or her together have control of it;

(v) a body corporate is connected with another body corporate—

(I) if the same person has control of both or a person has control of one and persons connected with that person or that person and persons connected with that person have control of the other, or

(II) if a group of 2 or more persons has control of each body corporate and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he or she is connected;

(vi) in this subparagraph “relative” means brother, sister, ancestor or lineal descendant.

(c) In this paragraph “control”, in relation to a body corporate or in relation to a partnership, has the meaning assigned to it by section 4 of the Act.

(6) Tax chargeable in respect of the supply of goods within the meaning of section 19(1)(c) of the Act is excluded from the application of section 80(1) of the Act.

(7) Tax chargeable in respect of—

(a) the supply of services referred to in section 16(3)(b) of the Act, or

(b) the supply of goods or services in any of the circumstances referred to in section 37(3) and sections 38 to 44 of the Act, is excluded from the application of section 80(1) of the Act,

(8) An authorisation for the purposes of section 80(1) of the Act does not affect the amount on which tax is chargeable under the Act.

(9) (a) An accountable person authorised for the purposes of section 80(1) of the Act is required to notify the Commissioners in writing if, for any period of 4 consecutive calendar months during the validity of such authorisation, he or she no longer satisfies the requirements of that section, and such notification shall be made within 30 days of the end of such 4 month period.

(b) Where an accountable person fails to notify the Commissioners in accordance with subparagraph (a), the authorisation for the purposes of section 80(1) of the Act is deemed to be cancelled in accordance with paragraph (10). Such cancellation has effect for the purposes of section 80(1) of the Act from the commencement of the taxable period during which the accountable person should have notified the Commissioners in accordance with subparagraph (a).

(10) (a) The Commissioners shall cancel an authorisation to which section 80(1) of the Act and paragraph (4) relates if either—

(i) the person so authorised makes a request to them in writing to have the authorisation cancelled, or

(ii) they consider that the person no longer satisfies the requirements of section 80(1) of the Act.

(b) The Commissioners shall cancel the authorisation to which section 80(1) of the Act and paragraph (4) relates by issuing a notice in writing to the authorised person. Without prejudice to paragraph (9)(b), such cancellation has effect from the commencement of the taxable period during which notice is given or from the commencement of such later taxable period as may be specified in the notice.

(11) (a) Where a person who for any period is authorised under section 80(1) of the Act ceases to be so authorised or ceases to be an accountable person, the tax payable by him or her for the taxable period during which the cessation occurs shall be adjusted in accordance with this paragraph.

(b) The total amount due to the person at the end of the authorised period for goods and services supplied by him or her shall be apportioned between each rate of tax specified in section 46(1) of the Act in accordance with the following formula—

A	×	B
		C

where—

A is the total amount due to the person at the end of the authorised period for goods and services supplied by him or her during the authorised period,

B is the taxable amount in respect of taxable supplies at each rate of tax in the 12 months prior to the date of cessation or in the authorised period, whichever is the shorter, and

C is the taxable amount in respect of total taxable supplies in the 12 months prior to the date of cessation or in the authorised period, whichever is the shorter,

but the apportionment between the various rates of tax may be made in accordance with any other basis which may be agreed between the accountable person and the Commissioners.

(c) The amount so apportioned at each rate is a tax-inclusive amount and the tax therein shall be treated as tax due for the taxable period in which the cessation occurs.

(d) No adjustment of liability as provided for in this paragraph shall be made if the cessation referred to in subparagraph (a) was occasioned by the death of the taxable person.

(e) For the purposes of this paragraph—

“the authorised period” means the period during which the person was authorised to apply the moneys received basis of accounting but, where the person was authorised to apply the moneys received basis of accounting for more than 6 years, the authorised period is deemed to be for a period of 6 years ending on the date on which the cancellation of the authorisation has effect;

“the tax therein” shall be established at the rates specified in section 46(1) of the Act—

(i) applicable on the date the authorised period ends, or

(ii) applicable at the time the relevant goods and services were supplied, where such details can be established to the satisfaction of the Commissioners.