HM Revenue and Customs Brief 02/11
Submit Articles Back to Articles
Issued 25 January 2011
VAT: HM Revenue and Customs' position following the First
Tier Tribunal decision in the case of John Price
This Brief explains HM Revenue & Customs' (HMRC)
policy following the First Tier Tribunal decision in the case of John
The Tribunal agreed with the appellant that roller blinds were
'building materials' as defined by Note 22 to Group 5 of Schedule 8 to
the VAT Act 1994. As a result, the appellant was entitled to treat the
VAT incurred on the purchase of the blinds as recoverable from HMRC
under the provisions of the DIY Housebuilders and Converters VAT Refund
Scheme (s.35 of the VAT Act 1994).
HMRC's view remains unchanged in that roller blinds (and
other 'window furniture') are not 'building materials' as defined and
will not be changing its policy. The Tribunal chairman did not hear any
evidence on the point of what is and what is not a ‘building material’
for VAT purposes but reached his conclusion as a matter of judicial
notice, that is, as a common sense fact.
Given the small amount of VAT at stake in this particular
case, HMRC will not be appealing this decision further.
The construction of residential property is zero-rated for
VAT purposes. The zero rate not only applies to the construction
services but also to the 'building materials' incorporated into the
property by the person(s) supplying those construction services.
It has never been HMRC’s policy that the zero rate should
apply to all goods that were incorporated into residential property by
builders during its construction. Their policy has always been to
restrict the zero rate to those basic materials such as bricks, mortar,
timber, glass etc., that make up the structure of a property and to
those standard fittings and fixtures such as kitchen units, work
surfaces, sinks and draining boards, wash hand basins, baths and
toilets that enable the property to function.
To achieve the above result, 'building materials' have been
defined in law as meaning, in relation to any description of building,
'goods of a description ordinarily incorporated by builders in a
building of that description (or its site)'. Certain goods are
specifically excluded from the definition, for example, fitted
furniture, electrical and gas appliances but with some exceptions made
for kitchen furniture, boilers etc.
DIY house builders, to the extent that they purchase building
materials and use their own (or others') labour to incorporate those
materials into their properties, are unable to benefit from the above
zero rate on 'building materials'. However, they can claim the VAT
incurred on the purchase of those materials through a refund scheme.
The restriction on the zero rate for building materials noted above
also restricts the amounts of VAT recoverable through the refund scheme.
About the Author
© Crown Copyright 2011.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2011-01-26 14:13:18 in Tax Articles