- Elliott makes a difference
- E3 Consulting wins 'Best Independent Tax Consultancy Firm'
- SPA Annual Golf Day 2024
- We will be at the South East Construction Expo
- Finalist in 2024 Taxation Awards
- Planning Enforcement Changes to take effect from 25 April 2024 - LURA2023
- Spring Budget 2024
- Pilgrim's Progress: VOA Appeal Decision
- Deadline looming for registration of Scottish property owners
- Nowhere to hide for Furnished Holiday Let owners
- 100% Full Expensing made permanent
- RICS CIL Index 2024 Announcement
- SPA Clay Shoot 2023
- We are exhibiting at UKREiiF 2023
- Welsh Freeports - The two winning bids are...
- Chancellor announces Full Expensing
- 100% Tax relief confirmed for two Scottish Green Freeports
- Making Your Furnished Holiday Lettings More Profitable
- Happy New Year 2023
- Second U-Turn in Urenco Chemplants Case – Court of Appeal Decision
- How Specialists help to Save through Property Tax
- E3 Consulting on the move in London
- Autumn Statement (November): impact on capital allowances
- December Roundtable - Community Infrastructure Levy & Land Remediation Tax Relief
- E3 goes to top with calls for planning re-think
- The Chancellor’s ‘Mini Budget’ – A Tax Bonfire!
- HM Queen Elizabeth II
- Gardiner v Hertsmere - Court of Appeal Judgment
- E3 Consulting's new main office in Wimborne
- Green light for Freeports
- Buried treasure?
- And the winner is...
- Cavernous divide in ‘plant’ arguments
- And the finalists are…
- E3 Consulting puts property tax on the radar
- Help E3 Consulting grow in a nurturing environment
- Spring Statement 2022 – Real Estate & Construction Update
- E3 joins the dots with Building People
- Property Marketing Awards 2022 – Celebrating 30 years of PMA
- Navigating choppy waters
- E3 helps GPs go green with trailblazing surgery
- CIL – New Research Lays Bare Planning Cost
- Webinar success as spotlight shines on Super-deduction
- CIL appeal win saves householder £22,000
- Business Analyst Flo joins E³
- Budget Day Autumn 2021
- Firing on all cylinders
- LRTR Boost your Tax Savings & Unlocking Toxic Land
- CIL by Numbers!
- Shining the legal spotlight on capital allowances
- UPDATE: 130% Super-deduction to be available for landlords
- Specialist speakers announced for CIL webinar panel discussion
- Happy 18th birthday…to us!
- Land remediation myths cleared up at conference
- E³ Consulting – 18th anniversary
- Tax Day 23 March 2021 … over hyped & under whelming!
- Super-deduction…super insight from E³ Consulting’s webinar
- Budget 2021 – Update – Super Deduction
- Budget 2021 Update – Significant tax breaks for freeports announced
- Budget – 2021 – Small Profit Corporation Tax Rate
- UK FREEPORTS - Will Tax Incentives Fulfil Their Purpose?
- E³ Consulting Support Minstead Trust’s Online Christmas Raffle
- E³ Consulting’s Autumn Property Tax Webinars
- £1m AIA Extension
- Alun Oliver becomes CEDR Accredited Mediator
- Property & Construction Update
- Community Infrastructure Levy (CIL) - New Year, new rules!
- Budget 2020 - Wish list for Eco friendly Buildings
- Todd Arnison joins YEP Southampton committee
- Welcome to our Winter update!
- RICS Community Infrastructure Levy Talks
- University Award for Apprentice Todd
- Toasting a Record Year for E3 Consulting
- It was 'Not Too Taxing' for the E3 Team at the SPA Clay Shoot
- Finalist in 2019 Accounting Excellence Awards - Specialist Team of the Year
- Finalist in 2019 Taxation Awards - Best Independent Tax Consultancy Firm
- Celebrating 15 Years in Style
- Consulting Boutiques: A Different Perspective on Consulting
- Studying Modern Languages: what skills do you gain and how are these relevant in work?
- It's all in the Mind
- Capital allowance changes consultation
- International Invasive Weed Conference
- Significant tax savings illuminated at London landmark
- So close for Todd in national award
- Taxing matters for property sector - Seminar 17 October 2018
- National award shortlist for apprentice Todd
- Three top tips for organising a fundraising event - and how these are relevant in business
- Alun takes seat on CLA regional board
- E3's Tax Trappers at it again at the SPA Clay Shoot
- Property Tax Update at Athelhampton House
- Welcome to our New Property Tax Surveyor
- Success at the JCI UK National Convention 2017
- Defeat for Taylor Wimpey on Builder's Block VAT Claim
- Non-Resident Landlords (NRL) to move into Corporation Tax Regime
- Joining JCI Southampton as a Corporate Partner
- Signatory to the RICS Inclusive Employer Quality Mark
- E3 Consulting Sponsors Hampshire Hot Shots!
- S.O.S.! Tackling the Housing Crisis, CIL and Build to Rent
- International Women's Day: Making a Commitment to Diversity and Equal Opportunities
- CPD Property Tax Talks
- Why E3 Consulting Employs Interns
- Re-joining the Dorset Chamber of Commerce & Industry
- Welcoming New Interns to E3's Team
- Sponsorship of Alresford Town Football Club
- Finalist in 2015 Taxation Awards - Tax Consultancy Firm
- University of Warwick's Proactive Support of SME Businesses
- Property Taxation Specialist - Finalist in 2014 Taxation Awards
- VAT Specialist, Martin Scammell, Wins Indirect Tax Award
- Capital allowances claims using sampling for fixtures: HMRC Brief
- Business Property Relief on FHLs
- Victory in the 9th annual Solent Property Tennis Tournament
- Industry Response to HMRC's Capital Allowances proposals
- Winning Partnership with Rose Bowl Plc
- E3 Consulting Wins at Taxation Awards 2011
- E3 Consulting Shortlisted for Lexis Nexis Taxation Awards 2011
- Property Taxation Planning Opportunities - November 2010
- E3 Consulting Crowned Mixed Doubles Tennis Champions!
Defeat for Taylor Wimpey on Builder's Block VAT Claim
This was a significant and complex VAT case heard before the Upper Tier Tribunal in which Taylor Wimpey had sought recovery of £51.2m of input VAT
After many years of pursuit, Taylor Wimpey Plc (TW), one of the UK’s largest house builders, heard in February 2017 that the ‘Builders Block’ was lawful under EU law. This was a significant and complex VAT case heard before the Upper Tier Tribunal (Tax & Chancery) 2017-UKUT0034-(TCC) in which Taylor Wimpey had sought recovery of £51.2million of input VAT.
This related to various appliances and goods incorporated into their houses, amongst others: carpets, built-in ovens, extractor hoods, washing machines, dishwashers, freezers and microwave ovens.
History of the Case
The dispute related to a ‘Fleming claim’ (claims for under-declared or overpaid VAT, potentially going back as far as the inception of VAT in 1973)[1], that Taylor Wimpey made against £51.2million of VAT it paid on goods installed in new zero-rated homes between 1973 and 1997. The Claim Items were white goods and carpets, which TW argued had been unlawfully taxed by HMRC. The legislation in question was the UK’s ‘Builder’s Block’; an exclusion of white goods from input tax recovery, first introduced in 1973 but with subsequent amendments, including the addition of carpets in 1987. HMRC had essentially ‘Blocked’ certain assets from recovery - even where they were ordinarily incorporated into a building.
TW contended:
- 1. The exclusion of the items from input tax recovery (known as the Builders Block) was illegal under EU law
- 2. The Claim Items were not ‘incorporated into the building’ – referencing the English land law meaning of ‘fixtures’
- 3. The Claim Items, if incorporated, were fixtures of the kind ordinarily installed by builders since 1995, or ordinarily installed in buildings of that specification
HMRC argued that the Builder’s Block had been in effect during the period of the claim, and therefore TW were not entitled to any reimbursement. They also argued that the Builder’s Block was perfectly lawful, referencing the EU mandate that allowed member states to determine “other exemptions which it considers necessary” in relation to tax law. This allowed the UK Government to determine which items it would and would not allow to be tax-deductible.
TW initially took their case to the First-Tier Tribunal (FTT) in 2014 (UKFTT 575 TC03700) and again in 2015 (UKFTT TC0074), which ultimately found that the Builders Block was, in some aspects, contrary to EU law. However the result was unsatisfactory; accepting the FTT decision could have cost TW more than the VAT recovery they were claiming. So TW appealed to the Upper Tribunal.
Upper Tribunal
The Upper Tribunal (UT) heard the case in November 2016 and the decision was published in February 2017, in which Mr Justice Warren and Judge Berner ruled against TW’s claim.
The UT cited Article 17 of the Second Directive of EU law, which gave the UK entitlement to zero-rate new builds but denied refunds for other goods incorporated in the buildings. The UT determined that the Builder’s Block did not contravene EU law by providing for specific exemptions of certain items. Thus it was held to be perfectly legal.
The UT also held that whether an asset is ‘incorporated’ cannot be determined by reference to the law on chattels, or whether the item forms part of a single zero rated supply. In order for an item to be incorporated there has to be a material degree of attachment to the building. Such attachment is more than simply being attached to the electricity supply by a removable plug - to consider an appliance ‘incorporated’ something extra is necessary. This can be built-in housings, or fixing it in a non-temporary way to the building structure or the relevant mains services.
Lastly, the UT held that an item “will be ordinarily installed or incorporated, … unless its installation or incorporation would be out of the ordinary, uncommon or unusual”. Importantly, the UT clarified the comparator when applying the ‘ordinarily’ exemption, as in McCarthy & Stone plc (VTD 7014) you should look at “buildings which most closely accord with the use of the building in question”; i.e. compare luxury houses with luxury houses, single family dwellings with single family dwellings, flats with flats etc.
Contrary to the FTT, the UT decided that what is ordinary must be considered as at the time of the expenditure and not just when the legislation was amended or enacted.
The UT chose not to determine the individual claim items – but instructed the parties to review and agree the position by reference to the decision principles they had set out.
Summary Findings
- The Builder’s Block is legal under both EU and UK law
- VAT will continue to be irrecoverable on carpets and other white goods unless you can remove them without tools and the goods are portable ‘of their nature’
- Items ‘ordinarily installed’ can be exempted from the Builder’s Block – buildings should be compared to like structures with similar intended uses
- House-builders may now modify the form or nature of the item’s attachment to a property to determine certain fixtures as ‘incorporated’
This was a complex and highly technical VAT case, which ultimately could have affected house builders in the UK significantly. Given the potential VAT at stake, HMRC had fought vigorously to maintain the current, and in their view, established position.
As yet there has been no public update available to see what the final outcome has been reached by HMRC and TW. If they fail to agree a position, having relied upon the UT decision, it is possible that the matter may revert back to the UT for final determination on an item by item basis. As it currently stands, the ‘Builders Block’ is still valid – but there are some aspects of the case dicta that help clarify the current application of the law for developers.
Please contact the E3 Consulting team if you wish to discuss any aspect of this case, any Real Estate VAT issues or other property tax matters.
[1] Following the Fleming (& Conde Nast) case decisions in January 2008 - see https://www.gov.uk/government/publications/fleming-claims-for-vat-repayments
Share this page
Related Services
RSS
- This page can be found in the following news feeds:
- E3 Consulting News