Construction VAT Treatment
Discussion
I’m struggling to come up with a definitive answer to the VAT treatment in this scenario, and I was hoping that amongst the many experts on here, someone would know the answer.
A housing developer, constructing new build homes, has asked a subcontractor to paint the hoarding on a site. Normally, as the subcontractor is painting the new homes, his work is zero rated for VAT. However, as this work is not directly on the houses, should it be charged at the standard rate of VAT.
I’m inclined to believe that it should have 20% VAT, but I don’t know if it would fall under one of HMRC's lovely blanket rules where because the whole site is new build, all labour should be zero rated.
You'd think after 10+ years working in construction accounts, I'd know the answer straight away.
TIA
A housing developer, constructing new build homes, has asked a subcontractor to paint the hoarding on a site. Normally, as the subcontractor is painting the new homes, his work is zero rated for VAT. However, as this work is not directly on the houses, should it be charged at the standard rate of VAT.
I’m inclined to believe that it should have 20% VAT, but I don’t know if it would fall under one of HMRC's lovely blanket rules where because the whole site is new build, all labour should be zero rated.
You'd think after 10+ years working in construction accounts, I'd know the answer straight away.
TIA
3.3.4 Work closely connected to the construction of the building
Subject to paragraph 3.3.6, your work is closely connected to the construction of the building when it either:
(a) allows the construction of the building to take place, such as when you:
demolish existing buildings and structures as part of a single project to construct a new building or buildings in their place (the granting of a right to remove materials is not the supply of demolition services and is standard-rated)
provide or improve an access point to a building site to allow deliveries to be made
carry out ground works (including the levelling and drainage of land) as part of the process of constructing a new building or buildings in its place
provide site clearance or ‘builders’ clean’ services
secure the site
(b) produces works that allow the building to be used, such as works in connection with the:
means of providing water and power to the building (this can extend to the work required to make the connection to the nearest existing supply)
means of providing within the development site access to the building (for example roads, footpaths, parking areas, drives and patios)
means of providing security (such as walls, fences and gates - but note that most electrical appliances are always standard-rated, further information is in paragraph 13.6)
provision of soft landscaping within the site of a building (such as the application of topsoil, seeding with grass or laying turf)
The planting of shrubs, trees and flowers would not normally be seen as being ‘closely connected…’ except to the extent that it’s detailed on a landscaping scheme approved by a planning authority under the terms of a planning consent condition. This does not include the replacement of trees and shrubs that die, or become damaged or diseased.
It’s not possible to produce an exhaustive list of services that are closely connected to the construction of the building, and each case not included in (a) and (b) must be looked at on its own merits.
You need not be the main contractor in order for your supplies to be considered to be ‘works closely connected…’. You can be a subcontractor or another contractor.
https://www.gov.uk/guidance/buildings-and-construc...
Subject to paragraph 3.3.6, your work is closely connected to the construction of the building when it either:
(a) allows the construction of the building to take place, such as when you:
demolish existing buildings and structures as part of a single project to construct a new building or buildings in their place (the granting of a right to remove materials is not the supply of demolition services and is standard-rated)
provide or improve an access point to a building site to allow deliveries to be made
carry out ground works (including the levelling and drainage of land) as part of the process of constructing a new building or buildings in its place
provide site clearance or ‘builders’ clean’ services
secure the site
(b) produces works that allow the building to be used, such as works in connection with the:
means of providing water and power to the building (this can extend to the work required to make the connection to the nearest existing supply)
means of providing within the development site access to the building (for example roads, footpaths, parking areas, drives and patios)
means of providing security (such as walls, fences and gates - but note that most electrical appliances are always standard-rated, further information is in paragraph 13.6)
provision of soft landscaping within the site of a building (such as the application of topsoil, seeding with grass or laying turf)
The planting of shrubs, trees and flowers would not normally be seen as being ‘closely connected…’ except to the extent that it’s detailed on a landscaping scheme approved by a planning authority under the terms of a planning consent condition. This does not include the replacement of trees and shrubs that die, or become damaged or diseased.
It’s not possible to produce an exhaustive list of services that are closely connected to the construction of the building, and each case not included in (a) and (b) must be looked at on its own merits.
You need not be the main contractor in order for your supplies to be considered to be ‘works closely connected…’. You can be a subcontractor or another contractor.
https://www.gov.uk/guidance/buildings-and-construc...
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