In David Cosham v HMRC [2019] UKFTT 0119 (TC), the FTT has held that, for the purposes of determining if VAT was refundable under the DIY housebuilders scheme, eco-build houses were a separate category of building.

Background

Mr Cosham built a property which he describes as an “eco-build” property or a sustainable home. Mr Cosham installed electric blinds which were programmed to regulate the temperature in each of the rooms in which they were installed.

Mr Cosham’s accountant wrote to HMRC on 6 March 2017, to claim a total of £14,505.53 in

VAT refunds under the DIY housebuilders scheme, pursuant to section 35, Value Added Tax Act 1994 (VATA). Note 22 of Group 5, Schedule 8, VATA defines “Building Materials” as “goods of a description ordinarily incorporated by builders in a building of that description”. Whilst electrical appliances are generally excluded, there are exceptions including for appliances which regulate temperature.

HMRC accepted some elements of the claim but rejected the claim relating to the electric blinds, which amounted to £2,303.17. Mr Cosham requested a review of HMRC’s decision and the reviewing officer upheld HMRC’s decision that the VAT incurred on the electric blinds could not be claimed under the DIY housebuilders scheme because they did not fall within the definition of “building materials” at Note 22.

Mr Cosham appealed to the FTT.

FTT decision

The appeal was dismissed.

Building of that description

The FTT noted that the main point at issue was the question of how, when considering the installation of fixtures into a specific type of building, that building is to be categorised for the purpose of making the comparison required by Note 22.

The FTT agreed with Mr Cosham that at the time of his VAT claim, an eco-home would be generally recognised as a distinct category of building. The FTT referred to Taylor Wimpey v HMRC [2017] UKUT 0034 (TCC) and Taylor Wimpey v HMRC [2018] UKUT 055 (TCC) and whether the categorisation is one which goes to the quality of the building (which was rejected as a category in Taylor Wimpey [2017] UKUT 0034 (TCC)) or the use of the building (which was accepted as a category in Taylor Wimpey [2018] UKUT 055 (TCC)). In the view of the FTT, the eco-home fell between these two categories and therefore the eco-build was in its own distinct category.

Would the electric blinds ordinarily be incorporated into buildings of this type?

The FTT considered that in order for Mr Cosham to be successful he needed to demonstrate that the electric blinds would be ordinarily incorporated into buildings of this type. Whilst Mr Cosham was adamant that this was the case, he produced no evidence in support of his claim and as a result the FTT could not accept that electric blinds are ordinarily installed in eco-build houses and his appeal failed on this basis.

Are electric blinds excluded from the definition of electrical appliances?

As the appeal failed at the previous stage, the FTT did not consider whether electric blinds were excluded from the definition of electrical appliances.

Comment

This decision provides useful guidance on the meaning of “ordinarily incorporated” for the purposes of Note 22 of Group 5, Schedule 8, VATA. The decision also highlights the importance of considering the VAT implications of a construction at the outset of building works. 

A copy of the decision can be viewed here.