Dwelling or RRP – liability for sub-contractors

Les Howard
VAT Consultant
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There has been some commentary on the Summit Electrical Installations Ltd FTT case. The company is an electrical contractor. It carried out certain works to a new building, being constructed for student accommodation in Leicester.

The main contractor, Create Construction Ltd, provided a zero-rating certificate to Summit, on the basis that the project was the construction of RRP (relevant residential purpose) buildings. HMRC denied zero-rating to Summit. As a result of this, Summit prepared to issue VAT-only invoices to Create which refused to accept them. They said, since VAT was not properly charged, it could not recover it as input tax.

Summit decided to Appeal. Other contractors involved in the same project were interested in the outcome of the Appeal. The decision is here: http://www.bailii.org/uk/cases/UKFTT/TC/2017/TC06006.html


By reference to HMRC’s statement of case and skeleton argument it was not at all apparent what the issue between the parties in fact was.”

This is all too frequent.

Further, one week before the Hearing, HMRC introduced an additional argument that the construction was of an RRP, not a dwelling!


Moving onto the substantive issues.


HMRC argued that, where a building qualifies as both a dwelling and a RRP building, it is up to the customer of the main contractor which provision he wishes to rely on.

If he chooses RRP rather than dwelling, and issues a zero-rating certificate accordingly, that is determinative of the nature of the supply. That would also cause all services of sub-contractors to be standard rated, even if the building were also a dwelling.

Comment: I can understand a customer ‘playing safe’ by issuing a zero-rate RRP certificate. This would protect his interest if HMRC were to rule that the building was not a dwelling. (Such a certificate cannot be issued retrospectively.)

HMRC indicated this to be their policy. The Tribunal stated; “that there is absolutely no basis for HMRC’s policy … with regard to this issue.” Paras 54-59 demolish their argument.


The second HMRC argument, introduced just before the Hearing, was that, since Note 2(c) was not fulfilled, the building was not a dwelling, but an RRP building.

Note 2(c) provides one of four conditions for a building to be a dwelling that “the separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision.” The planning permission restricted occupancy to full time students at either the University of Leicester of DeMontfort University.  The Tribunal provided some background on the Shields and Burton Upper Tier decisions on this issue.

The Tribunal held that the terms of the planning permission were not a prohibition as envisaged in Note 2(c), as it lacked the ‘required link to specific land or premises.’  Commenting that the ‘restriction’ was to a group of around 30,000 persons, it said; “To see a restriction narrowing the class of occupier not to the user of any specific or identified land but to such a vast class of people cannot, in the Tribunal’s view, represent a prohibition on separate use” (para 46).

I understand this logic, but I will not be surprised if HMRC Appeal the decision on this point.


About Les Howard


Hi, I am a VAT Consultant, working mainly with charities. I am based in Cambridgeshire

I have over 20 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.


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