VAT on alterations

[Pford75]

As you may know, we have LBC for the removal of a porch, stripping of paint and limewashing the house.

I'd rather like to avoid paying VAT if possible and my builder seems amenable (I understand it's down to him to accept that no VAT is chargeable?)

Question though - he is only doing some stonework and fitting balustrades...I'm doing the stripping and limewashing myself. I know if I purchase the materials, then I have to pay VAT.....but is there any reason why he can't supply the materials (VAT free) and have me do the job?

 

[MatthewC]

Surely stripping and limewashing will be regarded as repair and maintenance, and thus not eligible for VAT relief?

I was looking at http://www.buildingconservation.com/articles/vatornovat/vatornovat.htm the other day, and this is a very murky subject in some cases!

 

[Pford75]

Well, the whole LBC includes the removal of a porch, alterations to the facade and some steps etc. Stripping of masonry paint, installation of external insulation, rendering and then limewashing. Some in practice, the over application is 'alteration' and not 'repair'. But I agree, it's all very murky.

 

[Pford75]

From HMRC http://customs.hmrc.gov.uk/channels...CE_CL_000513&propertyType=document#P896_85590

2.2 Building materials
Retailers and builders’ merchants charge VAT at the standard rate on most items they sell.

Builders, however, charge VAT on ‘building materials’ that they supply and incorporate in a building (or its site) at the same rate as for their work. So, if their work is zero-rated or reduced-rated, then so are the ‘building materials’. However, some items are not ‘building materials’ and remain standard-rated.

Further information on this can be found in sections 11 and 13.

9.3 Is the protected building being ‘altered’?
A building is altered when its fabric, such as its walls, roof, internal surfaces, floors, stairs, windows, doors, plumbing and wiring is changed in a meaningful way.

9.3.1 What are works of repair or maintenance?
Works of repair or maintenance are those tasks designed to minimise, for as long as possible, the need for, and future scale and cost of, further attention to the fabric of the building. Changes to the physical features of the building are not zero-rated alterations if, in the exercise of proper repair and maintenance of the building, they are either:

■trifling or insignificant, or
■dictated by the nature and use of modern building materials.

 

[Penners]

Goodness knows I'm no tax expert, but if the work you're carrying out is changing the building "in a meaningful way" (which I should have thought it definitely is), and the work has LBC, then I reckon the builder is fully entitled to supply all the materials for this work without charging you VAT.

 

[MatthewC]

Well, the whole LBC includes the removal of a porch, alterations to the facade and some steps etc. Stripping of masonry paint, installation of external insulation, rendering and then limewashing. Some in practice, the over application is 'alteration' and not 'repair'. But I agree, it's all very murky.

Ah! If you have added external insulation which is most definitely an "alteration", then the consequent rendering and limewashing must also be part of that alteration. QED?

I love the HMRC definition you quoted:

A building is altered when its fabric, such as its walls, roof, internal surfaces, floors, stairs, windows, doors, plumbing and wiring is changed in a meaningful way.

They probably clarify "a meaningful way" as being "when it's an alteration, not a repair".

 

[Pford75]

Exactly - I guess it all comes down to having a builder that agrees with you.

The HMRC guidance also talks about work which is 'non trivial' - when you're a cr@p at DIY as I am....absolutely everything is 'non trivial'...so I guess that means I'm covered.

 

[AMc]

Previous experience with HMRC ended with the comment that "VAT is a self assessed tax and it is the responsibility of the VAT registered business to apply the rules correctly. HMRC will only get involved if they believe the rules have been misapplied during a fraud investigation or VAT audit" (or words to that effect).
Of course the reading of the rules means that if you're builder isn't incorporating the materials then they may not be allowed to zero rate them otherwise you could easily set up a wholesale business of 0% VAT materials

If your builder is happy then away you go.

 

[Flyfisher]

That's been my experience too, with a copy of the LBC being sufficient 'proof' for the builders' accountant to lodge in their files in case of such an audit.

But the whole issue really should be discussed with the chosen builder before agreeing the contract.