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Red Carpet treatment by Vatman

Red Carpet treatment by Vatman

Client runs a quite up market B&B and is on the flat rate scheme.

Last year she decided that the carpets in the B&B needed replacing and these cost over £2,000 in a single transaction from a single supplier and so the client claimed the input tax as relating to capital expenditure goods.

The vatman is now saying that this does not meet the conditions of VAT Notice 733/15 and has also referred my client to VAT Notice 708/12.2 and 708/13.7 as backup for his decision.and has also made reference to the VAT Toolkit page 4.

To my mind, carpets are certainly capital in this context and I would classify them along with other fixtures and fittings that go in such a B&B.

From what I can see 708/12.2 refers to developers and I cannot see that it is relevant and similarly 708/13.7 follows on from this and would also seem not be relevant. The toolkit refers to refurbishment or extension work not being allowable but the usual meaning of refurbishment is to renovate and decorate with work such as painting, repairs and cleaning to make the building look new again. The toolkit does not make any mention of inclusion of fixtures and fittings such as carpets within refurbishment.

What am I missing?. 

 Any help gratefully received.

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01st Mar 2016 13:58

You have encountered a dickhead[***] from HMRC who does not understand VAT.

Construction services may include the provision of goods and may result in new or improved goods, but it is nonetheless a supply of services. VAT cannot be recovered on supplies of services, even though they may be capital in nature and the cost may exceed £2,000. That is the point of the paragraphs to which your client has been referred.

A "freestanding" supply of carpet (perhaps including installation) is a supply of (installed) goods, and not a supply of services, and so the input VAT can be recovered under the FRS where the cost exceeds £2,000 (as you say it does).

Stand your ground.

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By codling
01st Mar 2016 14:16

Thanks Portia,

I really felt I was going bonkers and had missed something basic. I will not only be standing my ground but will be attacking on all fronts.

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