In Taylor Wimpey Plc v HMRC1 , the Upper Tribunal (UT) dismissed the taxpayers’ appeal in relation to its claim to recover input VAT incurred on the provision of certain white goods, kitchen appliances and carpets installed in newly built houses.

Background

Taylor Wimpey Plc (the Appellant) was the representative member of a large construction group. It made claims for recovery of historic input tax amounting to over £51m incurred in relation to the installation of various items in new-building housing including ovens, surface hobs, extractor hoods, washing machines, microwaves, dishwashers, refrigerators, freezers and carpets.

HMRC denied the Appellant’s claim for input tax on the basis the items fell within the scope of the builder’s block which was introduced by Input Tax (Exceptions) No. 1 Order2 , so that any input incurred on these items was not recoverable (the Builders Block).

The Appellant’s appeal to the First-tier Tribunal (FTT) was unsuccessful and it appealed to the UT.

The Appellant contended that the Builders Block was unlawful under EU law and that as the relevant items were not “incorporated” into the building, the Builders Block did not apply. Alternatively, it argued that the goods were “ordinarily installed as fixtures”.

UT decision

The UT found that the Builders Block was not unlawful under EU law. The Second Directive, Article 17 and the Sixth VAT Directive, Article 28(2)(a), authorised the UK to provide the Builders Block system in relation to new builds which allows input tax recovery in respect of the listed exceptions and denies input tax recovery in respect of other goods incorporated into the building.

The UT considered the meaning of “incorporated” and concluded that it was not the same as “installed as fixtures”. It was possible that an item could be incorporated into a building without also being a fixture. The relevant test is whether it has any material attachment to the building.

In considering the various items, the UT noted that a built-in oven, a surface hob, an extractor hood, a wired and plumbed-in washing machine and a wired and plumbed-in dishwasher would all be installed fittings, but that stand-alone washer driers and tumble driers would only be installed as fittings if either “they were attached in a non-temporary manner to ventilation or were installed in a location with some reasonable expectation of permanence”. The UT found that fitted carpets were fittings.

The UT adjourned the hearing to allow the parties to agree the extent of the claim that relates to goods that are not fixtures in light of the guidance it had provided. If the parties cannot agree, further arguments will follow. 

Comment

The UT has provided some helpful guidance on the test to be applied when deciding whether goods have been incorporated into a building and therefore are within the scope of the Builders Block. White goods may be outside the scope of Builders Block where they are not sufficiently attached to the building.

A copy of the decision can be found here.