Business tax – policy paper

VAT: deductions relating to foreign branches

This Tax Information and Impact Note is about VAT deductions relating to foreign branches and amends VAT Regulations 1995 (SI 1995/2518).

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This measure amends the VAT Regulations(SI 1995/2518), and will mean that supplies made by foreign branches can no longer be taken into account when calculating how much VAT incurred on overhead costs can be deducted by partly exempt businesses in the UK. It is intended that this measure will have effect on and after 1 August 2015 but, where 31 July 2015 falls within the VAT longer period of accounting for a business, it will not have effect until the first day of the next longer period that applies to that business.

A draft legislation for this measure has been published at Draft legislation: The Value Added Tax (Amendment) (No) Regulations 2015 - deductible VAT relating to foreign branches.