HMRC have changed their policy as regards the VAT treatment of the installation of blinds following the decision of the First-tier Tribunal in Wickford Development Co Ltd (Wickford) TC2017/08197 and TC2018/03555. As a result of the Tribunal decision, HMRC now accept that manual blinds are building materials for the purposes of construction services.
The policy change will affect the construction industry and DIY housebuilders.
For VAT purposes, the construction of residential property is zero-rated. The zero rate applies to the construction services and the building materials that are incorporated into the property by the persons constructing the property. The application of the zero rate is limited to basic materials that make up the structure of the property (such as bricks, mortar, timber and glass) and also to standard fixtures and fittings that enable the property to function (such as kitchen units and work surfaces, baths, toilets and hand basins). DIY builders are unable to benefit from the zero rate if they buy the building materials and incorporate them into the property. However, they can recover the VAT charged on basic materials and standard fixtures and fittings through the VAT refund scheme.
Prior to the Tribunal decision, HMRC’s view (in Customs Brief 02/11) was that roller blinds and other window furniture were not ‘building materials’, meaning VAT could not be recovered. However, the Tribunal found that manual window blinds are goods of a description ordinarily incorporated by builders into properties as single family dwelling. HMRC have accepted this decision and revised their policy. Manual window blinds and shutters are now considered building materials for VAT purposes and can be zero-rated when installed in a qualifying build. However, the change of policy does not extend to motorised blinds.
The policy change is effective from 5 October 2020. DIY housebuilders can claim a refund on the VAT incurred on the installation of manual blinds prior to the date of the policy change.
Written by the Tax Advice Network