Constable VAT Focus 22 October 2021


Goods and services that can be claimed for under the VAT DIY scheme

HMRC has updated its guidance on claiming a VAT refund under the DIY housebuilders’ scheme to add that manual window blinds and shutters are allowable building materials with effect from 5th October 2020.

Agent Update

HMRC has published an agent update providing a round-up of recent developments. It can be found here. This includes information on the appeals process detailed below.

Updates to HMRC appeals processes

As part of the COVID-19 support package for customers, HMRC introduced a 3 month extended window to appeal against tax decisions and penalties from February 2020, if the delay was due to COVID-19. This extension ended on 30th September 2021. For tax decisions and penalties dated up to and including 30th September 2021, the extended window to appeal continues to be available. However, taxpayers should follow the normal process and times for appealing decisions dated on or after 1st October 2021.

HM Revenue and Customs Brief 13 (2021)

HMRC has published a new VAT Brief which explains HMRC’s revised policy on the meaning of ‘entire interest’ in the context of the VAT treatment of the construction self-supply charge. This follows the decision of the Supreme Court on 31 March 2021 in Balhousie Holdings Limited 2021 UKSC 11.

The guidance applies to:

  • organisations within the care home, NHS or charities sector
  • businesses engaged in property transactions carried out for a relevant residential or relevant charitable purpose.

If you are concerned that this may affect your organisation please reach out to your usual Constable VAT contact.


First Tier Tribunal

1. Silver Sea Properties

This case concerned Silver Sea Properties (Leamington Spa) Sarl (“PropCo”) which supplied certain items of furniture, fixtures and equipment (FFE) with a new care home known as Priors House. The care home was leased by PropCo to Care UK Community Partnerships Ltd (“OpCo”). The VAT in dispute in this appeal is £96,291. The matters in dispute were primarily:

  • The extent to which PropCo is prevented from claiming credit for input tax on FFE because of the operation of the ‘Builders Block’
  • Whether the FFE were supplied by PropCo to OpCo as an element of a single supply, the principal element of which was zero rated grant of a major interest in the Priors House building?

The builder’s block is in place to block claims for input tax on incorporated FFE unless they are building materials. This case is of interest as the Tribunal was required to consider whether the FFE were “building materials”? Building materials are goods of a description ‘ordinarily incorporated’ by builders. Certain items such as furniture, electrical and gas appliances and carpets are specifically excluded. The Tribunal stated, after considering relevant case law, that an item would be ‘ordinarily incorporated’ if it is commonplace or not out of the ordinary to include in the building, or the item is of a kind that you would expect a builder to incorporate without any special instruction.  Annexe 2 of the case is particularly useful as it provides a break-down of each FFE item and whether recovery of VAT on the item is blocked.

The Tribunal also considered the argument that the FFE qualified for zero rating as was part of a single supply of zero rated lease as a “turnkey” care home supplied under a single contract, the lease for the care home and noted that the fit out of the FFE only occurred after OpCo’s occupation and after issue of the Certificate of Practical Completion. After applying the tests used in the “Card Protection Plan” case to distinguish between a multiple and single supply, the Tribunal found that the Priors House building and the FFE do not form a single indivisible economic supply. The appeal was therefore dismissed.

Please note that this newsletter is intended to provide a general overview of the subject. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this blog post. Specialist VAT advice should always be sought in relation to your particular circumstance.