This appeal, that of Mr David Cosham ( UKFTT TC06985), concerned electric blinds installed in an eco-build home. Were these “ordinarily incorporated” by builders in a sustainable home, resulting in the VAT being allowable under the DIY VAT Refund Scheme?
No, the appeal was dismissed.
Eco-build properties were considered to be a separate class of property in themselves. The First-tier Tribunal may have provided the wrong result for the taxpayer, only just. However, it is a very interesting decision as it could be argued that, compared to older housebuilding practices, the vast majority of new build homes are definable as “eco”.
This case has opened up the question of what exactly is ordinarily incorporated into a sustainable home or eco-build. We wait to see how this will eventually play out in this sector.
Mr Cosham looked to recover VAT charged under the DIY VAT reclaim procedure on his home, which he understood to be an “eco build” / sustainable home. HMRC had agreed part of the claim whilst rejecting other elements of the claim.
The materials that were restricted were electric blinds fitted in the property. They were installed in south-facing rooms and were programmed to regulate the temperature.
It was firstly agreed by both parties that the blinds had been incorporated into the property in question. The main question to be answered by the VAT tribunal was whether the materials, were “ordinarily incorporated” by builders “in a building of that description”.
Mr Cosham’s arguments
In terms of what was meant to be a “building of that description”, Mr Cosham understood this to be a specific type of building, being an eco-build or sustainable home. He commented that comparing his home to a four-bedroomed home would not be comparing like with like.
In terms of what was meant by the term “ordinarily incorporated”, he commented that it was now standard practice in eco-buildings to incorporate electric blinds as a means of temperature control. He relied on earlier tribunal decisions dealing with ordinary roller blinds being treated as building materials. Furthermore, in one such decision, an appeal concerning electric blinds which the appellant lost, the Tribunal said:
“It may be in the fullness of time that his blinds will be accepted as a normal installation … but that time has not been reached yet”.
HMRC’s view was that the correct comparator building for applying the test was that of an ordinary four-bedroomed house. This was as a result of an earlier decision in the courts where it was held that the correct test was to look at “the way the building is used as a building”.
Accordingly, in their opinion, electric blinds were not an ordinary feature of such buildings/dwellings, the VAT upon which should not fall to be recoverable.
In arriving at its conclusion, the Tribunal agreed that sustainable homes or eco-builds would generally be recognised as a distinct category of buildings.
However, in order for Mr Cosham to succeed in his appeal, he needed to demonstrate that electric blinds are “ordinarily incorporated” in such homes, which he was unable to do. Accordingly, the appeal would be unsuccessful.
Who is potentially affected?
This case is relevant to:
- Anybody who is contemplating building a house and looking to submit a VAT form 431NB to HMRC. What items are allowable for inclusion? Items such as air conditioning equipment, curtain poles/rails and saunas (!) are allowable, whereas AGA / range cookers are questionable.
You should ensure the claim is submitted in time to HMRC i.e. within three months of completion of the build and be sure to include, amongst other documents:
- Planning permission;
- Full set of building plans; and
- Proof from your local authority that the work is completed.