UPDATE – July 2021
HMRC has revised its VAT policy regarding VAT on Window Shutters and Blinds on New Builds.
Manually operated window blinds and shutters are now considered building materials for VAT purposes.
They can be zero-rated when installed in a qualifying build.
Zero-rating of VAT on window shutters and blinds can only apply if the products are:
- Manually operated (it cannot be applied to products with an integral motor).
- Supplied and fitted (i.e. not self-install).
- The building must be a qualifying building.
- The blinds or shutters must be supplied and fitted during the construction phase (i.e. before the building has been officially completed and handed over to the occupier. Zero-rating does not apply to a new property that is sold, and new owners move in and then decide what window coverings they require. These would be charged at standard VAT rates.
Wickford Development Co Ltd (Wickford) vs HMRC, October 2020.
A First-Tier Tribunal ruled in favour of the housebuilder who sold homes with blinds “incorporated” in the building – (Wickford Development Co Ltd (Wickford) v HMRC [2020] TC07864).
Wickford gave evidence that the installation of blinds in new residential developments was increasingly commonplace.
The Company pointed out that someone could not easily remove bespoke measured fitted blinds without seriously damaging plaster within the windows, UPVC doors and door frames.
The judge commented that if the goods being addressed were window dressings or coverings, HMRC’s distinction in its guidance between curtain poles (which could be zero-rated in a new-build) and blinds (which at the time of the Tribunal could not be zero-rated) was illogical.
The judge found blinds are goods of a description ordinarily incorporated by builders in properties built as single-family dwellings.
The FTT concluded:
That manual window blinds are ‘building materials as they are ordinarily incorporated by builders in properties built as single-family dwellings.
They should be zero-rated for VAT purposes, and the input tax claim was allowed.
The First-Tier Tribunal concluded that the guidance in the 2011 HMRC Brief was incorrect.
HMRC Accepted the Ruling
HMRC accepted the FTT’s decision that manual window blinds and shutters should be considered building materials for VAT purposes.
HMRC added that this ruling does not extend to any motorised window blinds as they are considered electrical appliances.
VAT on window shutters and blinds for new-build properties has been a significant point of contention for a long time between home builders, window-shading companies and HMRC.
Until this recent ruling, HMRC has always maintained a policy of excluding internal window shutters and other “window furniture” from the zero-rate VAT applied to building materials. Despite losing the tribunal case.
Construction of a Residential Property
The construction of a residential property is zero-rated for VAT purposes. However, according to HMRC, the zero rate applies to the construction services and the building materials incorporated into the property by the person(s) supplying those construction services.
HMRC says that the zero rate should apply to all goods incorporated into a residential property by builders during its construction.
The zero rate has been restricted to the necessary materials. Materials such as bricks, mortar, timber, and glass that make up the property’s structure. Plus, those standard fittings and fixtures such as kitchen units, work surfaces, sinks and draining boards, wash hand basins, baths, and toilets which enable the property to function.
Further Information
The VAT regime is quite complex, and even though zero-rating/reduced rating may be available based on the information in VAT Notice 708, this may not necessarily apply to Subcontractors. We strongly recommend that if in doubt, you check with HMRC to establish your specific tax position.
July 2021
