Constable VAT Land & Property Focus 13 October 2020

Welcome to the third 2020 edition of the Constable VAT Land & Property Focus. This newsletter is intended for readers with an interest in the land and property sector and provides a summary of recent updates and significant judgments from the Tribunals and Courts which may be relevant to you or your business.


Revenue & Customs Brief 6 (2020)
This Brief concerns the VAT treatment of property search fees charged by solicitors and conveyancers. From 1 December 2020, the postal concession will be withdrawn. Since 1991, this concession has allowed solicitors and conveyancers to treat such fees as disbursements when property searches are conducted by post, even though the formal conditions for such treatment are not met. The First-tier Tribunal decision in Brabners LLP (2017) TC 06093, agreed with HMRC that electronic (online) search fees were not disbursements. Allowing postal search fees to continue to be treated as VAT disbursements in all cases is inconsistent with that decision.

Revenue & Customs Brief 11 (2020)
HMRC has released this brief which explains how changes to existing leases are treated for VAT and Stamp Duty Land Tax purposes. As a result of the current COVID-19 pandemic, many tenants are suffering a loss of income and want to vary the terms of their lease with their landlord. This brief has guidance on the appropriate VAT and Stamp Duty Land Tax treatment of the most common lease variations.

Revenue & Customs Brief 12 (2020): VAT Early Termination Fees and Compensation Payments
HMRC has released a new Brief, following recent judgments from the CJEU, which announces an important change to policy. Fees and payments charged where a contract is terminated early were previously outside the scope of VAT, now HMRC regards them as taxable in line with the main contract. Further commentary can be found in our blog here.


The domestic reverse charge for construction services was due to be implemented on 1 October 2019. However, in September 2019, HMRC announced that this would be delayed for 12 months for further consultation following concerns which had been expressed by industry representatives that some businesses in the construction sector were not ready to implement the procedure by this date.

As a result of the COVID-19 pandemic, HMRC has again delayed the introduction of the domestic reverse charge for construction services until 1 March 2021.  Whilst there is still some time, it is very unlikely that HMRC will extend this deadline again, so it is vital that your business is ready before March. If you are unfamiliar with the domestic reverse charge you can read more in our blog. However, if you are not yet prepared for the introduction, Constable VAT will be happy to assist.

HMRC will hold a live webinar about how to apply the domestic reverse charge. Registration for this webinar is now open.


Earlier this year, HMRC announced that taxpayers would be granted an extension to the time limit for notifying HMRC of an option to tax. Normally, HMRC must be notified within 30 days of making the decision to opt a building. However, the COVID-19 pandemic made that rule challenging to follow so the time limit for notifying HMRC of a decision to opt to tax was extended to 90 days. This measure only applies to decisions made between 15 February and 31 October 2020. As we approach 31 October, taxpayers wishing to notify HMRC of an option to tax need to consider the time limits in order to avoid any costly mistakes.


1. DIY Housebuilder Scheme: Are Houseboats “Buildings designed as dwellings”?

This case concerned Mr Edward Burrell’s claim for repayment of VAT incurred on the construction of a houseboat. He submitted a claim under the DIY Housebuilder scheme which HMRC denied on the grounds that a houseboat is not a building designed as a dwelling and is, therefore, not within the scope of the DIY Housebuilders VAT refund scheme.

Mr Burrell argued that the foundations of the construction project were built on land as was the structure of the boat. Concrete was added to the foundations and a crane was used to lift the concrete-based houseboat into the river where it remains. This, he suggested, made it a concrete based home which is designed as a dwelling, in line with the planning permission he had received.

HMRC argued that the DIY scheme applies to “… the construction of a building designed as a dwelling or a number of dwellings…” and that this definition does not encompass houseboats as “building” is the operative word in the provision. Considering previous caselaw around houseboats, the Tribunal agreed with HMRC and observed that a houseboat is not a building within the usual sense of the word.

The Tribunal considered the planning permission which Mr Burrell had received which specifically stated that “No permanent structures or buildings placed on the land are permitted”. It found that the express prohibition in the planning permission on building permanent buildings was fatal to Mr Burrell’s argument and held in favour of HMRC.

Constable Comment: The DIY Scheme is a topic which is often seen in the Tribunals for a variety of reasons. However, what counts as a building for VAT purposes is not such a common issue. The Tribunal relied on the Oxford Dictionary’s definition of building – “A permanent fixed thing built for occupation, such as a house, school or factory”.  If you are wondering whether a building you are constructing, or have constructed, could be eligible for the scheme, please do not hesitate to get in touch with Constable VAT.

2. Insulation for roofs, or something more?

This appeal concerned supplies of insulated roof panels being made by Greenspace Ltd which it treated as reduced rated for VAT. HMRC disagreed with this analysis, believing that the supplies were standard rated. Therefore, HMRC assessed Greenspace for £2,581,092 of VAT relating to the periods from 12/17 – 12/19. Greenspace appeal against that assessment.

UK VAT law affords a reduced rate of VAT (5%) to the installation of energy saving materials. The explanatory notes to Schedule 7A, VATA explain that this includes insulation for walls, floors, ceilings, roofs and lofts. Greenspace believed that it was supplying roof insulation and so charged the reduced rate of VAT to its customers.

HMRC disagreed with this analysis and suggested that Greenspace was supplying more than insulation as it was selling roof panels which, whilst insulated to improve insulation, represented more than a supply of merely energy saving materials and amounted to the supply of a new roof. The supply of a new roof on an old building does not benefit from the reduced rate of VAT.

In considering the dispute, the Tribunal turned to previous case law which has considered this area such as Pinevale which considered the supply of energy efficient roof panels. That case concluded that supplies of such panels are standard rated as they were used to form the roof itself rather than to insulate an existing roof. Arguments about the aim of the customer in fitting the panels were not taken into account as it is the underlying supply and not the intent of the consumer which must be assessed for VAT.

Greenspace sought to differentiate this case from its own, claiming that the panels in Pinevale were not comparable as they did not have the same extensive insulating properties as Greenspace’s. It suggested that the primary purpose of a Pinevale style panel was to cover the roof, whereas the enhanced properties of a Greenspace panel meant that the primary purpose of fitting one would be to gain the insulative benefit.

The Tribunal rejected this argument, noting that, in form, what is supplied by Greenspace is a form of roof covering and not merely insulation for an existing roof. In order to benefit from the reduced rate, suppliers must supply insulation to existing roofs and not essentially replace the roof with new panels, regardless as to how insulative the new panels may be. The appeal was dismissed and the assessments are upheld.

Constable Comment: This case serves as a reminder of the principle that VAT exemptions and reduced rating provision must always be interpreted strictly. Greenspace sought to distinguish a “strict” interpretation from a “restrictive” interpretation. This argument was unlikely to be successful as it was not providing insulation for roofs, it was providing insulated roof panels. The two products are distinct from each other, and would be in the eyes of a typical consumer, so it does not seem restrictive to regard the two as different for VAT classification purposes. Any organisation which is applying a VAT exemption or reduction needs to ensure that it is entitled to do so in order to avoid a situation such as that in this case where Greenspace owe over £2mil in VAT.

This newsletter is intended as a general guide to current VAT issues and is not intended to be a comprehensive statement of the law. 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 newsletter. Specialist VAT advice should always be sought in relation to your particular circumstance.