A company operates as a builders’ merchant and has supplied steel sheets to a customer who is building his own home. The customer has provided the builders’ merchant with a copy of the planning consent supporting the demolition of an existing property and the construction of a new dwelling. 

Can the builders’ merchant therefore zero-rate the supply of the steel? 

VAT notice 708 section 11 sets out the VAT liability for those materials supplied without construction services, such as over the counter sales, and those materials incorporated by a contractor. 
Where a builder is contracted to ‘supply and fit’ so is incorporating those materials into the new dwelling as part of the construction process, then as long as they are of a kind ordinarily incorporated into dwellings and are not excluded from the definition of building materials, the materials will follow the liability of the construction service. In the case of a new dwelling this will be zero-rated, and with qualifying conversions and renovations will be reduced-rated. Section 13 of Notice 708 details what are ‘building materials’ and explains the exclusions. Goods which are incorporated into the building but which are not building materials are standard-rated. 
However, goods supplied by a retailer or builders’ merchant are standard-rated as they do not supply them with construction services. There are exceptions for protective boots and helmets sold for industrial use, printed manuals and goods supplied in connection with certain building services supplied to disabled people, but in the above case where the materials are to be used in the construction of a new house, VAT must be charged at 20%. If the customer is building a house for his own occupation, he may be able to recover the VAT he incurs on his building materials from HMRC using the DIY builders’ scheme. It will be helpful in this respect if the builders’ merchant client issues him with a VAT invoice. 

Questions or queries? 

Please do let us know if you have any questions or if you need any further help understanding the guidance – please call us on 01932 564098 or message us here. 

Information correct at time of publication 

This tax Q&A was published in August 2019 – please be aware that the information above may have changed in subsequent months. This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice. 
(This content was originally produced by Croner Taxwise Limited and is reproduced with their permission) 
Tagged as: Property, VAT
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