Commentary on Sections Glossary History Section 448: Additional VAT rebate generates disposal value
1577.This section is based on section 138(3A) of CAA 1990. It treats an additional VAT rebate, to which the section applies, as if it is a disposal value to be brought into account (usually) for the chargeable period in which the rebate accrues. The words “or, if the rebate is made on or after the date on which the trade is permanently discontinued, accruing immediately before the discontinuance” at the end of section 138(3A) are thought to be unnecessary and have not been rewritten. See Note 58 in Annex 2.
1578.Subsections (1) to (3) set out the additional VAT rebates to which the section applies. The reference in section 138(3A) of CAA 1990 to a person “carrying on a trade” could be thought to indicate that VAT rebates are ignored if they are made before the relevant trade starts. Section 444 now provides that relief can be obtained for the commercial loss where an asset is bought and sold at a loss before the relevant trade starts. It would be odd if VAT rebates made in relation to such an asset, and which are a factor in arriving at the commercial loss, were ignored. This section proceeds on the basis that such rebates are taken into account just as an additional VAT liability incurred before the relevant trade starts might be taken into account under section 137(1A) and 137(5) of CAA 1990. See Change 53 in Annex 1.
1579.Subsections (4) and (5) provide that the VAT rebate is treated as a disposal value. This differs from section 138(3A) of CAA 1990 that effectively provides that the whole of the VAT rebate is treated as a balancing charge. In most cases this will have no effect because the person has claimed a 100% allowance. But it could have an effect if the person claims less than the full allowance available on the qualifying expenditure. This change reduces the charge in such a case. See Change 49 in Annex 1.