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Relevant Residential New Build - Reclaiming VAT

Relevant Residential New Build - Main Contractor Reclaiming VAT from their Subcontractor's Invoices

Relevant Residential New Build - Main Contractor Reclaiming VAT from their Subcontractor's Invoices

Owner of Property (Student Accommodation block - so relevant residential) = A

Main Contractor (separate Developing Company but part of VAT Group) = B

Subcontractors to Main Contractor = C

A buys land and contracts (JCT) with B to build.  B invoices a at zero rate (certificate 18.1 in place)

C (non-connected) carries out works for B and invoices with standard rate VAT (as per Notice 708 17.4).  VAT subsequently reclaimed from HMRC by B

HMRC is now querying with B their reclaiming of the VAT.  HMRC is stating -

'For new build houses/dwellings, all subcontractors providing construction services should correctly zero rate their services under Sch 8, Gp 5 item 2 of the VATA 1994. Any VAT incorrectly charged by subcontractors is not allowable as it is not input tax.'

Rubbish or true?  I think HMRC is confusing this with a dwelling despite them knowing it is student accommodation.

 

Any thoughts?

 

Regards

 

Replies

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By Ruddles
17th Oct 2018 15:26

Rubbish - refer HMRC to note 12 of Group 5

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to Ruddles
17th Oct 2018 17:51

Specifically, sub para (a).

If you can decipher it.

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By Ruddles
to lionofludesch
17th Oct 2018 18:38

sub para (a) seems quite clear to me - unless the contractor will himself be using the property for a relevant purpose supplies by sub-contractors to that contractor cannot be zero-rated.

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By Ruddles
to lionofludesch
17th Oct 2018 18:40

Duplicate

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avatar
17th Oct 2018 18:00

My VAT notes from a course a couple of years ago says, for relevant residential buildings, that zero rating is restricted to the main contractor and subcontractors may not zero rate their services.

However it goes on to say that, in the case of suitably configured student accommodation, they can qualify to be seen as dwellings. But the reference is to Notice 02/14 which has since been withdrawn.

Edit: And for some reason I couldn't see the previous replies from those far better qualified than I when I typed my response.

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to paulwakefield1
18th Oct 2018 12:22

The dwellings point is dealt with in VAT Notice 708. See para 15, but there, the OP should observe, in particular 15.8; If the end client has provided the main contractor with a certificate, the subcontractors standard rate their supplies.

This should be dealt with by letter to HMRC, and the words "if you refer to VAT Notice 708" should be used as much as possible.

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avatar
18th Oct 2018 11:58

Thanks all ... so the consensus is that subcontractors are correct in invoicing standard rate as per 17.4 ...

Now how about HMRC stance that this isn't input tax? I'm assuming JMRC could (but should overlook) argue that it isn't IT if a dwelling, but can't in any way argue that it isn't IT on relevant residential?

The other point is that HMRC is not worse off on either dwelling or relevant residential scenario (subject to the subcontractors handing over the VAT to HMRC)

Are HMRC incorrect?

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to paul_scotland_5
18th Oct 2018 12:20

.

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By Ruddles
to paul_scotland_5
18th Oct 2018 12:46

paul_scotland_5 wrote:

Now how about HMRC stance that this isn't input tax?

How about it?

Portia has given you the answer. If HMRC continue with their argument ask them to raise an assessement, telling them that you will appeal it immediately followed by, if necessary, a request for Review.

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