Commentary

V7.366 Construction services—zero-rated supplies

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.366 Construction services—zero-rated supplies

Part V7 Tax planning | Commentary

V7.366 Construction services—zero-rated supplies

Main categories of zero-rated work

Zero-rating applies to the following supplies:

  1.  

    •     building services relevant to new qualifying dwellings and communal residential buildings, and certain new buildings used by charities. In the case of work on a new dwelling, zero-rating also applies to the construction of a garage if it is built at the same time as the dwelling and it is intended to be occupied with it

  2.  

    •     services supplied in the course of construction of civil engineering work for the development of a new permanent residential caravan park

  3.  

    •     building services supplied to housing associations when non-residential buildings are converted into residential buildings

  4.  

    Note – for a non-residential to residential conversion, the building work will be subject to 5% VAT if the property owner is not a housing association.

  5.  

    •     building materials and certain electrical goods incorporated into a building by a builder who is also supplying any of the above zero-rated services

  6.  

    •     certain goods and services supplied to disabled persons

  7.  

    •     development of residential caravan parks

  8.  

    •     the first time connection of gas or electricity mains to dwellings and certain other residential buildings

An important point to remember is that building materials are only zero-rated if jointly supplied to the customer with construction services from the same builder – see Example 1.

Example 1

Smith Builders Ltd is installing kitchen units into a new house being built by Mr Jones. Mr Jones suggests that he buys the units himself from Kitchen Furniture Ltd and

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