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.