On 7 February 2017, the Upper Tribunal7 held that the UK’s “builder’s block” was not incompatible with EU law.

The builder’s block prevents house builders from claiming input VAT recovery on certain specified goods supplied as part of a (zero-rated) dwelling. For the builder’s block to apply, the goods must be “incorporated” in the dwelling. However this does not include items “ordinarily” installed by builders as fixtures. Taylor Wimpey sought to recover input VAT on built-in ovens, extractor hoods, washing machines, dishwashers, freezers and other items based on the following (alternative) arguments:

• the UK builder’s block was incompatible with EU law, or

• the items in question were not “incorporated” into the dwelling, or

• if incorporated, they were of a kind “ordinarily” installed by builders.

The Upper Tribunal held that the Principal VAT Directive enabled the UK to exclude from the scope of input VAT recovery those specified items comprised in a dwelling which would, if supplied separately, be standard-rated for VAT purposes.

On the question on the meaning of “incorporated” the Tribunal held that both fixtures and fittings could be incorporated into a dwelling. The Tribunal favoured a test of “installation” as a way of viewing chattels. In other words, did the chattel have a material degree of attachment to the dwelling (ie more than simply being plugged in), but something less than the degree of annexation found in a fixture? By way of guidance only, the Tribunal suggested that built-in kitchen appliances and plumbed in white goods would be installed as fittings, and therefore within the scope of the builder’s block as “incorporated” in the dwelling.

Finally, incorporated goods can be removed from the builder’s block if “ordinarily” installed by builders. On this, the Tribunal held that the proper test was whether the incorporation/ installation was, at the relevant time, commonplace or not out of the ordinary.

The decision can be viewed here.