Alteration or repair for VAT?

[vanhelgan]

We've just sought and had granted LBC for some replacement windows. There will be a change of design to some of the windows which will now match the others in our house and the adjoining semi. They will also be double glazed rather than the current single. As we have had to apply for LBC to do the work I was under the impression it should be zero rated for VAT. The joiner does not seem so sure though! Any thoughts much appreciated.
Thanks

 

[Penners]

I'm no kind of expert on this, but the following is my understanding of the way this VAT rule works.

Yours certainly sounds like one of those "grey area" cases. In order to qualify for zero VAT rating what you actually need to do is to convince the VAT-registered builder who will fit the windows that they qualify as an alteration. Your CO might be prepared to give you an opinion on this, but I wouldn't count on it. You could also contact HMRC for advice, but you might risk a bias against the job being classified as an alteration.

Assuming you manage to convince a builder to zero-rate the job, you'll need to ensure that the builder pays the joiner for the windows. Don't buy them yourself. The builder can then add them to his final invoice to you, and zero-rate them. But just make sure that he doesn't mark them up to the extent that this will negate any VAT benefit.

If the joiner is fitting the windows, then he needs to beconvinced that this counts as an alteration.

 

[Pford75]

It's not entirely clear and could depend on the status of the windows you are replacing. If you are replacing them because they are 'end of life' or rotten, then it is likely to be regarded as maintenance/repair (ie. VAT is due), whereas changing the windows for aesthetic reasons, or installing them in new locations is an alteration.....the guidance below comes direct from the HMRC website on this matter

9.3.2 Examples of repair or maintenance work and alterations
The following are examples of repair or maintenance work and alterations. Remember you can only zero-rate alterations when all of the conditions at sub-paragraph 9.1.2 at met.

Extensions - Alteration
Opening/closing doorways - Alteration
Replacement of rotten wooden windows with UPVC double glazing -Repair or maintenance
Replacement of UPVC double glazing with copies of original wooden windows for aesthetic reasons - Alteration
Installing a window where one did not exist before - Alteration
Re-felt and batten roof - Repair or maintenance
Replacement of a flat roof with a pitched roof - Alteration
Replacement of straw thatch with reeds; and changes to the ridge detail of a thatched roof - Repair or maintenance when carried out as part of the normal renewal programme.

 

[Flyfisher]

First, I'm not a tax/vat expert.

That said, my position would be that the work is an alteration because it was legally necessary to obtain LBC for the work (only on a listed property of course) and the local authority have supported this position by granting LBC, giving you the legal right to make the alteration. Thus, it's not just your opinion that the work is an alteration.

You've done the right thing by discussing the work with your contractor before the work starts. As I understand things, you cannot insist that your contractor zero-rates the work. They are responsible for their VAT accounting, so they would be taking any risk. I would suggest that your contractor has a word with their accountant and explain the situation. Give them a copy of your LBC as justification for the zero-VAT rating of the job, which they can put in their files to support their zero-rating decision in the event of a VAT audit.

But, ultimately, you cannot force the contractor to zero-rate the work and you cannot (as I understand things) claim back any VAT you pay. The work has to be zero-rated on the invoice.

You could consider asking another contractor?

Good luck.

 

[vanhelgan]

Thanks very much for the opinions. We could certainly get someone else to do the work, but were most impressed by this particular company, and they also happened to give us one of the better quotes. The windows we are replacing are certainly end of life, but as it is not a like for like replacement LBC was necessary. I can see that it is not clear from the HMRC info though. I always thought that the zero rating was there to offset the inconvenience of LBC applications and the increased cost of not buying "off the peg" uPVC etc. I'll have another chat with the guy and see what we can agree. If not on to the next on my list I guess!

Thanks again

 

[MatthewC]

I always thought that the zero rating was there to offset the inconvenience of LBC applications and the increased cost of not buying "off the peg" uPVC etc.

I wish it was that simple! We discussed this a week ago -see http://periodproperty.co.uk/forum/viewtopic.php?f=1&t=11585 - and reached no firm conclusion then either.

 

[Flyfisher]

:lol:
Yes, don't fall into the trap of looking for some logic from the tax system. After all, what sort of system financially encourages alterations to historic buildings worthy of preservation and protection, rather than repairs that would keep them in tip-top condition? :roll:

 

[vanhelgan]

very true..

 

[Penners]

That's novel.

It's not often you see the words "logic" and "tax" in the same sentence.