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HM Revenue and Customs Brief 02/11


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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 Price (TC/2010/01287).
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 position

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.

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Article Published/Sorted/Amended on Scopulus 2011-01-26 14:13:18 in Tax Articles

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