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Input tax – the ‘builders’ block’

7th Mar 2018
VAT Consultant vatadvice.org
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Businesses constructing new dwellings have long struggled with the rule that denies input tax recovery on certain items. Input tax is denied by SI 1992/3222, art 6, which refers to ‘goods other than builders materials,’ which are listed in Sch 8, Group 5, Note 22. HMRC Notice 708, chapters 12 and 13 refers to this rule. It is NOT straightforward. This Upper Tier  decision considered the history of the legislation from 1973 (para 6).

Taylor Wimpey Ltd have been running a case to have this rule challenged. Around £60m of VAT is at stake. The latest decision is in the Upper Tier Tribunal. Apart from input tax on extractor hoods for a 2 ½ year period, the case went in HMRC’s favour.

The Tribunal summarised TW’s Appeal: The basis for Taylor Wimpey’s claims was that, whether as a matter of EU law or domestic law, the restrictions in the domestic legislation on the deductibility of input tax on expenditure on certain goods incorporated in a new dwelling supplied by way of a zero-rated supply, described as “the Builder’s Block”, did not apply to the Claim Items in the Claim Period.

The decision referred back to a previous Upper Tier decision which considered the wording “ordinarily installed,” which is one crucial element in the issue. This decision is at: http://www.bailii.org/uk/cases/UKUT/TCC/2017/34.pdf, and the section is in paras 122 – 140. This discussion is summarised in the latest decision in para 8(4). The Upper Tier went on to discuss, in even more detail, the meaning of this phrase.

The latest decision is here: http://www.bailii.org/uk/cases/UKUT/TCC/2018/55.pdf Para 105 summarises the Tribunal’s conclusions.

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