Window blinds had been supplied and incorporated in new buildings, that were being developed by Wickford Development Co Ltd (“WDCL”). VAT had been incurred. The question that arose was whether they were eligible for VAT recovery in light of the restrictions in place concerning “building materials”. Reference was made to the VAT Act and whether they fell within one of the excluded categories. HMRC asserted that the blinds did fall within one of these categories and that VAT recovery should not be afforded to WDCL.
WDCL was a property development company. At the date of the hearing approximately 1,000 houses had been built with a further 600 left to be developed and sold. The question that arose was whether the supply of window blinds by WDCL was to be zero rated, resulting in VAT recovery being afforded to WDCL or whether it was caught under the commonly described “Builders Block”.
The “Builders Block” operates by various parts of the VAT legislation working in tandem, such that VAT on certain expenditure incurred by developers / builders is not afforded VAT recovery. “Building Materials” are those goods of a description ordinarily incorporated by builders in a building. However, such “Building Materials” do not include:
- Finished or prefabricated furniture, other than furniture designed to be fitted in a kitchen;
- Materials for the construction of fitted furniture, other than kitchen furniture;
- Electrical or gas appliances, unless the appliance is an appliance which is designed to heat space or water….; and
- Carpets or carpeting material.
VAT legislation explains that where a taxable person e.g. a business, incorporates goods in constructing a building for the purpose of making a VATable supply e.g. grant a freehold interest, VAT recovery is allowed. This is where the goods incorporated are “Building Materials” and not one of the four excluded categories above.
The question which was asked of the First Tier Tribunal was quite simply whether the window blinds installed in the properties, came within the definition of “Building Materials” and whether one of the excluded items applied.
The FTT ruled in favour of WDCL holding that the incorporation of the blinds in question were supplied and fitted as complete units in the properties and were therefore ordinarily “incorporated in the buildings”.
It distinguished earlier rulings which the it had earlier decided upon in relation to blinds and the “Builders Block” as these related to sophisticated electrically operated blinds with in-built heat sensors. Here it had ruled that they had fallen foul of the VAT legislation, not because they were blinds per se, but for some other reason.
Who is potentially affected?
This case is relevant to:
- Anybody who is contemplating building a house and looking to submit a VAT form 431NB to HMRC. What items are allowable for inclusion? Items such as air conditioning equipment, curtain poles/rails and saunas are allowable, whereas AGA / range cookers are questionable.
You should ensure the claim is submitted in time to HMRC i.e. within three months of completion of the build and be sure to include, amongst other documents:
- Planning permission;
- Full set of building plans; and
- Proof from your local authority that the work is completed.
In the event that you have any questions, please do not hesitate to get in touch.