A new VAT Accounting procedure is to be implemented in October 2019 whereby the Main Contractor will become responsible for a sub-contractors VAT. In the same way in which the Construction Industry Scheme has addressed the missing tax aspect of labourers and small traders in the construction industry (by placing the burden of tax collection on Main Contractors & Developers); the purpose of the Reverse Charge for Construction Services is to reduce the occurrences of ‘disappearing trader fraud’.
VAT accounted for nearly a quarter of all UK tax revenues in 2015/2016; so it’s virtually guaranteed it will remain in place after Brexit (VAT in one form or another being in place for many non-EU countries: Switzerland, Norway, Israel & now even the United Arab Emirates).
It is common for new builds to either begin life as extensions / partial build – either becoming full demolition by a gradual erosion of the planning process or due to unforeseen structural weaknesses. Zero rating for new builds hinges on the Demolition Test, a key aspect of the test being that planning consent is in place for the full demolition of any existing structures.
The first case concerned overall eligibility for a DIY Reclaim. Whilst Mr & Mrs Treanor had been granted permission for a residential unit, it was limited to occupation and use with an adjoining workshop. Whilst the Tribunal sympathised with the Treanors, they found that HMRC were correct to reject the claim as being a ‘live-work’ unit and not passing the test of ‘being designed as a dwelling’.
On 24th March, HMRC released a policy paper confirming that the Prime Minister has secured agreements with other officials at the March European Council to welcome increased flexibility for member states in relation to the zero and reduced rates of VAT. Whilst this was primarily related to the abolition of the ‘tampon tax’ – the increased flexibility could present an opportunity for the UK to reconsider other demands – like the ECJ ruling which suggested that the reduced rate on energy saving materials was in breach of EU laws.