In Taylor Wimpey PLC v HMRC [2018] UKUT 55, the Upper Tribunal (UT) concluded that the majority of the kitchen goods included in houses sold were subject to the ‘Builder’s block’ on recoverable VAT.
Property developers are not able to recover VAT on goods other than building materials, that are incorporated or installed as fittings in a dwelling which will be subject to a zero-rated First grant of a major interest. This is under the ‘Builders’ Block’.
This case involved a Fleming Repayment claim in excess of £50million by Taylor Wimpey with respect to VAT on:
- Built-in ovens
- Surface hobs
- Extractor hoods
- Washing machines and tumble driers
- Microwave ovens
- Dishwashers
- Fridges & Freezers
- Carpets & carpeting material.
Taylor Wimpey claimed:
- These had not been incorporated into the new build homes and they were not fixtures.
- If they were incorporated, they were fixtures ordinarily installed by builders and therefore were building materials.
- This would mean the goods were not blocked by the builder’s block until the time they were specifically blocked by an amendment to the block.
The First-Tier Tribunal (FTT) original found that no VAT was recoverable. The UT’s first hearing provided guidance on how to interpret the terms ‘incorporates’, ‘installed as a fitting’, and concluded that the Block was not unlawful.
The UT left it to HMRC and Taylor Wimpey to use the guidance to agree what the correct position was for each item. They could not agree so the case was resubmitted to the UT to help conclude.
The four issues the UT looked at in this appeal were:
- Incorporation issue
- Whether the claim items which are not fixtures are ‘fittings’ and ‘incorporated’ for the purposes of the Builder’s Block. Taylor Wimpey submit they are not and so the block does not apply to those items
- Ordinarily installed issue
- If they are incorporated, whether the items are ordinarily installed fixtures, ordinarily incorporated, or ordinarily installed as fittings. If they are, then for some of the period under review (prior to the specific blocking of electric and gas appliances etc.), the blocking order would not apply.
- Single or multiple supply
- Where not ‘incorporated’ whether the items are subject to a separate standard rating or whether they are part of a single supply of zero-rated new-build houses.
- Offset issue
- If not incorporated and a separate standard rated supply, whether input VAT deductions should be offset against the output VAT that should have been accounted for on the supply.
The UT decided as follows:
- Incorporation
- Incorporates includes installations as a fixture and as a fitting.
- To not be incorporated, the items must be:
- free-standing,
- attached to the building only by way of removable plug or other temporary attachment to mains, and
- regarded as portable as part of day-to-day use, even if attached to the mains, e.g. toasters, irons etc. which are routinely moved from place to place.
- All conditions must be met.
- Items may be installed fittings by being fitted, whether screwing in, into a kitchen in a location where they can reasonably be expected to remain and not be moved on a regular basis.
- The UT concluded that items that are placed in a space in a kitchen designed to accommodate those items are installed as fittings and regarded as incorporated.
- Based on the evidence seen, all the items were incorporated or installed fittings. This means that the blocking order was relevant and would apply if the goods are not ordinarily installed in a dwelling.
- Ordinarily installed
- It was agreed that this would only effect supplies prior to 1 June 1984, when the items in question were specifically blocked. It would also only affect ‘low spec items’, being ovens, hobs and extractor hoods.
- Based on a review of dwellings being constructed at the time of the input VAT being claimed:
- Extractor hoods were ordinarily installed by builders between 1 January 1982 and 1 June 1984.
- The other items were not ordinarily installed.
- Single or multiple supplies
- As all items are found to be incorporated, they are part of the single zero-rated supply of the dwellings.
- Offset issue
- This was no longer relevant to the case as the items were all incorporated.
- Had the items been found to not be incorporated, the UT confirmed that it would have been appropriate to offset the VAT due from HMRC to the VAT due from Taylor Wimpey.
To the extent that the appeal related to extractor hoods between 1 January 1982 and 1 June 1984 it was allowed. The appeal relating to the rest of the claim was dismissed.
Links
Reclaims and unjust enrichment
Land & Property VAT at a glance
External link Taylor Wimpey PLC v HMRC [2018] UKUT 55
