Following the outcome of various tax tribunals HMRC has revised its VAT policy which means manual window blinds and shutters are now considered building materials for VAT purposes and can be zero-rated when installed in a qualifying build
In the case of Wickford Development Co Ltd (Wickford) vs HMRC in October 2020, the First Tier Tribunal (FTT) ruled in favour of Wickford and found that VAT charged on roller blinds incorporated in the buildings was eligible for recovery as building materials.
Wickford, a developer, had claimed input VAT on the purchase of roller blinds which were fitted on new buildings on the basis that new homes are built and sold by developers and that the supply is zero-rated for VAT purposes and the builder recovers VAT on the building materials used.
The ruling has been issued in Revenue and Customs Brief 5, and revises the original Customs Brief 02/11, published by HMRC on 25 January 2011. This stated that roller blinds and other window furniture are not building materials, meaning that the VAT was blocked and could not be recovered by the contractors. Wickford then appealed this to the FTT.
The FTT concluded that the guidance in the 2011 HMRC Brief was incorrect and HMRC then accepted the FTT’s decision that manual window blinds and shutters are considered building materials for VAT purposes and that in the cases where VAT was disallowed an adjustment can be made on the VAT return.
HMRC added that this does not extend to any window blinds that are motorised. These are included in the exceptions of the blocking order as they are electrical appliances. HMRC’s policy on curtains has not changed as they are not fixtures incorporated into a building.
HMRC is now in the process of updating the guidance on this subject. The tax authority confirmed that it will not appeal this decision. The new guidance came into effect on 5 October 2020.
VAT on window shutters and blinds for new-build properties has been a significant point of contention for a long time between home builders, HMRC and window-covering supply companies.
According to the VAT Act 1994, the construction of a residential property is zero-rated for VAT purposes. The zero rate applies to the construction services and building materials incorporated into the property by the persons supplying those services. HMRC always maintained its policy of excluding internal window shutters and other window furniture.
The zero rate is restricted to basic materials that make up the structure of a property such as bricks, mortar, timber and glass. Standard fittings and fixtures that enable the property to function such as kitchen units, work surfaces, sinks and draining boards, wash hand basins, baths, and toilets are also covered.