Effect of changes in tax on existing contracts

(1) For the purposes of this section the expression “alteration in the law” means the coming into force of this Act or of any amendment to this Act by which– (a) a supply of goods or services is charged with, or ceases to be charged with, tax; or (b) the rate of tax in respect of the supply of goods or services is increased or reduced. (2) Where an alteration in the law is made and a supplier has, at any time, entered into a contract with a recipient in respect of the supply of goods or services, then, unless78 (a) express provision for the exclusion of any such alteration in the law is contained in the contract; or (b) the alteration in the law has been taken into account in entering into the contract, every such contract shall be deemed to be modified so that; (c) where the alteration in the law renders the supply liable to be charged with tax, or an increased amount of tax, the supplier may add to the amount agreed to be paid to him by the recipient the amount of that tax, or increase in tax, as the case may be; (d) where the alteration in the law renders the supply no longer liable to be charged with tax, or liable to be charged with a reduced amount of tax, the supplier or the recipient may deduct from the amount agreed to be paid under the contract the amount of that tax, or reduction in tax, as the case may be.