In Taylor Wimpey plc v HMRC [2017] UKUT 0034 (TCC) the Upper Tribunal (UT) set out some principles for determining when builders can reclaim VAT on white goods fitted in new dwellings.

The case concerns the ‘Builder’s Block’:

  • The block denies input VAT recovery on goods incorporated into a zero-rated dwelling.
  • It was first introduced in 1973, and has been modified several times since then.
  • Items ordinarily incorporated (pre-March 1995 ‘ordinarily installed as fixtures’) in a building are excluded, meaning input VAT can be recovered.
  • Recovery is specifically blocked for certain assets even where they are ordinarily incorporated in a building, including furniture, most electrical and gas appliances and (since 1987) carpets.

The taxpayer is looking to claim a total of £51.2m of input VAT relating to the installation in new build homes of whitegoods, kitchen appliances and carpets over a 24 year period.

The First-Tier Tribunal (FTT) previously found that none of this input VAT could be recovered.

The UT have now held that:

  • The Builder’s Block is lawful under EU law.
  • Whether something is ‘incorporated’ cannot be determined by reference to the law on fixtures, or whether the item forms part of a single zero rated supply. 
  • To be incorporated there has to be a material degree of attachment to the building.
  • Being attached to an electricity supply by a removeable plug is not enough to make an item incorporated: something more is needed such as housing it in a particular structure, or fixing it in a non-temporary way to the structure or an energy, water, ventilation or drainage supply.
  • An item will be ‘ordinarily’ installed or incorporated unless its installation / incorporation would be out of the ordinary, uncommon or unusual.
  • When applying the ‘ordinarily’ exemption you should:
    • Only look at similar buildings: e.g. compare houses with houses, flats with flats etc.
    • Consider what is ordinary at that time, and not just when the legislation was introduced.

The UT was not able to determine whether the individual claim items were eligible for input VAT recovery from the information it had.  Instead they directed the parties to agree the position by reference to the principles they had set out.


Our subscriber guides:

VAT: Land & Property at a glance

Single or multiple supply?

Case reference: Taylor Wimpey plc v HMRC [2017] UKUT 0034 (TCC)

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