A tax tribunal has potentially widened the scope for VAT recovery on the cost of some building materials.  The case (Coopers Fire Ltd v HMRC) concerned fire curtains for installation in dwellings, but is of wider significance.

The supply of certain building materials in the course of construction of a dwelling is zero-rated for VAT purposes, allowing the supplier to recover the VAT it incurs in making those supplies, without having to charge VAT on the supply itself.

In the case, HMRC disputed that zero-rating applied to fire curtains, except where they were legally required to be fitted.

The tribunal held that fire curtains fell within the definition of "building materials" in the relevant legislation, which required them to be "goods of a description ordinarily incorporated by builders in a building of that description". The tribunal reasoned that:

  • a "building of that description" meant dwellings in which fire protection was legally required or prudent, not all dwellings;
  • "ordinarily incorporated" meant incorporated "commonly", not at least 50% of the time; and
  • "goods of a description" referred to a class of goods, not a particular product, and here meant fire barriers.

This decision is good news for those in the building trade and may be of significance to other materials commonly fitted in dwellings, allowing a 20% saving on costs incurred on those materials.