This question is relevant when a contractor constructs a ‘qualifying’ building, such as a dwelling, relevant residential purpose (RRP), or relevant charitable purpose (RCP) building.
Zero-rating applies to services ‘in the course of construction.’ There comes a point in time when works of construction are completed, when the building is finished. Works carried out after that date cannot be works of construction. They are therefore standard rated. In most cases, the recipient of the supply cannot recover the input tax.
The most direct piece of VAT legislation is found in Sch 9, Group 1, Note 2: “A building shall be taken to be completed when an architect issues a certificate of practical completion in relation to it or it is first fully occupied, whichever happens first; and a civil engineering work shall be taken to be completed when an engineer issues a certificate of completion in relation to it or it is first fully used, whichever happens first.”
There is some HMRC guidance which gives a little more room for manoeuvre for the parties. The link is here: https://www.gov.uk/hmrc-internal-manuals/vat-construction/vconst02530 This includes this comment:
I cannot accept, as an immovable principle, the proposition that the course of construction of a building stops when the architect issues the Certificate of Practical Completion. It may be a useful working rule but it will be displaced where for example under the provisions of the original building contract some structural work is carried out or some essential services are installed, in both cases after the issue of the Certificate… It is all a matter of degree.
which is quoted from the VAT & Duties Tribunal in Carrophil Ltd .
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.