ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

Zero rating for subcontractor construction supplies

Construction workers
  • LinkedIn (opens new window)
  • Twitter (opens new window)
By Jan Garioch CA

21 June 2018

Key points:

  • HMRC have lost their appeal before the Upper Tribunal regarding zero rating by a subcontractor involved in the construction of student studio flats.
  • While the main contractor claimed zero rating under relevant residential property relief, HMRC sought to deny zero rating to the subcontractor.
  • The Tribunal held the subcontractor was entitled to zero rate his supply because the underlying flats qualified as dwellings.

Jan Garioch CA outlines the key aspects of HMRC v Summit Electrical Installations Ltd.

The Upper Tribunal have rejected an appeal from HMRC in their case against Summit Electrical Installations Ltd (Summit) [UKUT 0176(TCC)]. Summit was a subcontractor involved in the development of a block of student studio flats.

Each studio flat was fitted out with its own bathroom and kitchenette facilities. Central to the case was a planning condition on the development of the flats specifying they could only be occupied by ‘students attending Leicester or DeMontford universities or such higher/further educational establishments as the local authority may subsequently agree’.

Initially, Summit zero rated its invoices but, following a check, HMRC denied zero rating of Summit’s supplies. They contended that Summit should standard rate its supplies to the main contractor who would be entitled to recover on the basis of its zero-rated supply.

The contractor refused to accept VAT only invoices from Summit on the grounds that VAT was not properly chargeable and would, in any event, create significant cash flow problems. Summit was left with little alternative but to get a judicial determination on the nature of their supply.

Judicial determination

The First Tier Tribunal held that Summit made a zero-rated supply and HMRC appealed to the Upper Tribunal. The legal focus fell on Note (2) (c) to Group 5 of Schedule 8 VATA 1994. That provision grants zero rating to supplies in the course of construction of a dwelling where ‘the separate use, or disposal of the dwelling is not prohibited by the terms of any covenant, statutory planning consent or similar’.

After examination of relevant case law, the Upper Tribunal concluded that zero rating is not denied unless the effect of the relevant covenant, or planning condition is to prohibit the use of the premises separately from any other specific land. It was not enough that the use of the premises was linked to an activity or business. It was crucial that the link was to specific land or premises.

The [Upper Tribunal] pointed out that his submission was unpromising from the start since the planning condition contained no reference to particular university campuses.

Counsel for HMRC accepted it was crucial to answer the question of whether the planning condition was intended as a restriction on the use of the studios' flats by reference to the business of the universities (which would allow zero rating) or by reference to the buildings of the universities (which would deny zero rating).

He then attempted to argue that the planning restriction, in this case, was by reference to the buildings, but the Upper Tribunal had little difficulty in dismissing his argument. They pointed out that his submission was unpromising from the start since the planning condition contained no reference to particular university campuses or sites.

They felt the merit of his argument was further weakened by the fact that a student enrolled by either Leicester or DeMontford universities could attend part or all of their course in buildings not owned by one of those universities, yet if a flat were let to that student it would not breach the planning condition. Consequently, HMRC’s appeal was dismissed.

[The case] will also interest higher/further education institutions which are experiencing difficulty in securing sufficient accommodation for their students.

This ruling is important to the provision of student accommodation. It relieves main contractors from a major cash flow burden which may make more projects viable.

It will also interest higher/further education institutions which are experiencing difficulty in securing sufficient accommodation for their students, particularly in crowded cities where they face competition from other institutions. They can explore the use of planning restrictions like the one in this case without an adverse VAT consequence.

Lack of clarity from the UK government hampers scrutiny of EU proposals for VAT reform

London bridge big ben scene

Tax: HMRC's new priorities revealed

By Donald Drysdale for ICAS

10 May 2018

2022-11-mitigo 2022-11-mitigo
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: