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VAT: Mirror in the bathroom doesn’t qualify

Do mirrored cabinets with fitted lights qualify as building materials for VAT purposes? Neil Warren analyses the court’s thinking in the case of Darren Luke.

10th Sep 2019
Independent VAT Consultant
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Bathroom cabinet mirror
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If a house builder buys ‘building materials’ for a new dwelling, they can claim input tax on the purchase of the goods if they sell the house when it has been completed ie a zero-rated sale is made (freehold or lease exceeding 21 years).

A person who builds their own dwelling to live in, such as Darren Luke, can claim VAT on building materials through HMRC’s DIY scheme. However, if an item is not classed as a “building material” (eg a carpet), the input tax is blocked, (VAT Notice 708, para 12.2).

Similarly, a building contractor or subcontractor supplying building materials as part of their work on a new dwelling can zero-rate both the labour and materials. But otherwise, they can only zero-rate their labour.

Example 1

John is a VAT-registered subcontractor and fits a bedroom carpet to a new house being built by Developer Ltd. He charges £1,000 for the carpet and £200 for his labour. He will charge £200 VAT on the materials but the labour is zero-rated.

If John was supplying and fitting wood flooring, then all of his invoice would be zero-rated because a wooden floor covering is classed as a building material (VAT Notice 708, para 13.7).

Example 2

Louise is a VAT-registered subcontractor who fits a toilet and sink to the bathroom of a new house being built by Developer Ltd. She charges £1,000 for the goods and £200 for her labour. The entire supply will be zero-rated because toilets and sinks are classed as building materials that are ordinarily incorporated into a new dwelling (VAT Notice 708, para 11.2)

DIY venture

Darren Luke (TC07299) purchased three mirrored bathroom cabinets that were designed to be screwed to the wall, which also incorporated lights and a shaving socket.

He claimed VAT through his DIY claim on the basis that they were building materials because they were fixed to the building. However, HMRC disallowed the claim on the basis that they were not building materials because they could be easily removed from the wall.

Wimpey case

The tribunal took note of an upper tribunal decision, which forms a legal precedent: Taylor Wimpey Ltd UKUT0034 (TCC) and quoted a comment from that case report:

“Without setting a prescriptive test, there must in our view be a material degree of attachment to the building.”

The phrase “material degree of attachment”’ was considered by the judge in the Luke case, as he noted that it would be a “simple task to disconnect the electricity and unscrew the cabinets from the wall.” The appeal was dismissed.

Lists of materials

HMRC helpfully list specific items that they consider to be building materials or otherwise in VAT Notice 708, paras 13.5.2 and 13.5.3.

These lists do not have the force of law but they have been formulated after taking account of many years of tribunal decisions and arguments put forward by the building industry.

The Luke decision reaffirms HMRC’s view in para 13.5.3 that “elaborate vanity units” and “wall units, such as bathroom cabinets” are not building materials when fitted to a new dwelling.

Reversed view

When I started to read the Luke case, I felt that the taxpayer was justified in making a claim because if the VAT on the cabinets was £569.20, this was a gross spend of £3,415 and therefore these cabinets were not your basic units bought from a local store and must be permanently fixed to the building.

But having read the analysis in the report, and the reference to the Taylor Wimpy case, I changed my mind and concluded that I agreed with HMRC. After all, if something can be removed with a decent screwdriver, its permanent attachment to the building is not a reality.

Replies (9)

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Hallerud at Easter
By DJKL
10th Sep 2019 14:51

Not convinced with the screwdriver test-I can lift a click in laminate floor held by a skirting beading with just a screwdriver:- pry away the beading and lift the floor by hand- at worst might have to prise out a transition strip across the doorway. Trickier of course if built in under the skirtings.

In fact do not even need a sophisticated screwdriver, my folding knife/screwdriver/horse hoof cleaner would likely do.

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By Boltons Mum
11th Sep 2019 10:06

"After all, if something can be removed with a decent screwdriver, its permanent attachment to the building is not a reality." - Is this the answer to the question nobody wants to ask HMRC about Solar Panels too then?

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By Tim Robinson
11th Sep 2019 10:28

And I would not be touching anything which is wired into the mains....

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By Alvin1
11th Sep 2019 11:20

On the basis that a bathroom wall mounted cabinet is not allowable does that mean that a kitchen wall unit is similarly not allowable? Both can removed with a screwdriver, in the case of a kitchen wall unit it may not even be connected to an electricity supply so even simpler to remove.

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Julian Cohen
By bigugly
11th Sep 2019 13:00

...and a kitchen sink, which is also removed with a screwdrive, ditto ditto

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Replying to bigugly:
Quack
By Constantly Confused
12th Sep 2019 07:47

bigugly wrote:

...and a kitchen sink, which is also removed with a screwdrive, ditto ditto

What kind of weird pipes (and for that matter sinks) do you have in your house?!?

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By alan.rolfe
11th Sep 2019 16:29

The judgement seems to follow the HMRC Note 22 to Group 5 of Schedule 8, that excludes from ZR finished or prefabricated furniture, other than furniture designed to be fitted in kitchens.

The judgment says "Although they are fixed to the wall and are wired in
to the mains electricity it would be a simple task to disconnect the electricity and unscrew the
cabinets from the wall. Only the screw holes would then be visible as well as the electricity
cables which could easily be attached to wall sockets."
It seems that the furniture point overrides (in the judge's view) the substantive nature of the fixtures, despite the likely need for an electrician to deal with the cables.

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By djbrown
11th Sep 2019 17:07

Yet Notice 708 includes a list of items that can be zero rated - and yes, mirrors are included. And if you really want some soporific night time reading, have a look at the list of items allowable on DIY claims:
https://www.gov.uk/guidance/goods-and-services-you-can-claim-for-under-t...

Goodness me - I've just found "Mirrors (if firmly affixed to the dwelling" on the list.

There is also some appalling spelling in there. I guess they must have some work experience youngsters in this week.

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By coolmanwithbeard
12th Sep 2019 07:33

Hmm surely the test should be whether cabinet goes hard or soft when it is stale?

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