Just a little bit

Does zero rating apply to construction works?

The local authority granted planning permission to a couple for works to their house. The taxpayer was appointed as contractor. The original house was demolished except for some brick work under the ground floor bay window at the front and a column of bricks next to the bay at the corner which extended to the first floor. The taxpayer then built a new residential property on the site incorporating the retained part into it.

The taxpayer claimed that the works should be zero rated because they were supplies in the course of construction of a building designed as a dwelling within VATA 1994 Sch 8 group 5 item 2.

HMRC disagreed saying the works were extensions and alterations to an existing building because part of it had been retained.

The First-tier Tribunal dismissed the taxpayer’s appeal so the...