Wickford Development Company Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 October 2020 |
| Neutral Citation | [2020] UKFTT 387 (TC) |
| Date | 05 October 2020 |
| Court | First-tier Tribunal (Tax Chamber) |
[2020] UKFTT 387 (TC)
Judge James Austen
Ms Sarah Black of Counsel, instructed by Fisher Michael, Accountants, appeared for the appellant
Mr Anharul Qureshi, presenting officer of HM Revenue and Customs, appeared for the respondents
Value added tax – Refund of VAT to builders (builder's block) – VATA 1994, s. 25, 26, 30 – Whether VAT charged on roller blinds incorporated in the buildings was eligible for recovery as building materials – The definition of building materials in VATA 1994, Sch. 8, Grp. 5, Note 22, considered – Held the roller blinds were building materials within that definition – Price [2011] 00873 considered – Taylor Wimpey plc v R & C Commrs [2017] BVC 505 applied – HMRC Customs Brief 02/11 rejected – Appeal allowed.
The FTT found that roller blinds installed in new houses by the appellant were building materials for VAT purposes.
The appellant builds new houses for sale. Following a VAT inspection HMRC issued an assessment to recover input tax which the appellant had recovered on roller blinds installed in those houses.
Builders are not able to recover input tax incurred on items which are not “building materials”. Note 22 of Grp. 5 of Sch. 8 of VATA defines building materials as “goods of a description ordinarily incorporated by builders in a building of that description, (or its site)”. There are certain specific exceptions but blinds do not fall into these.
The FTT has considered roller blinds previously, in Price [2011] 00873 where the FTT concluded that roller blinds were building materials. Following this defeat HMRC released HMRC Brief 02/11 which confirmed that its policy that roller blinds were not building materials remained unchanged (HMRC did not appeal the Price decision as only ~£60 of VAT was at stake). The FTT in this case concluded that Price was correctly decided and that Brief 02/11 is incorrect (para. 51 and 52).
The FTT worked through Note 22 and considered whether the blinds in question were “incorporated”“ordinarily” by “builders”. It concluded that:
- The blinds in question were incorporated into the building as complete units (para. 68). An attempt by HMRC to distinguish between the blind and the brackets which were screwed to the walls was rejected.
- The FTT agreed that evidence provided by the appellant demonstrated that there is frequent and increasing use of blinds in new houses (para. 86). This, in the FTT's view meant that they were ordinarily incorporated. The FTT applied the definition of ordinarily which was articulated by the UT in Taylor Wimpey plc v R & C Commrs [2017] BVC 505, at para. 130 the UT stated that the test is one of ordinariness or commonness, which does not require that there be any industry standard (though clearly, if there were, that would be material factor), or that the items would be installed in most dwellings. It is, in the end, a matter of judgment, having regard to the evidence as to the relative frequency of installation by builders of the item in question at the material time.;
- The appellant demonstrated that other builders operating in the housing market did install roller blinds in properties other than at the specific request of the purchaser (para. 90).
The FTT thus reached the overall conclusion that “manual window blinds are goods of a description ordinarily incorporated by builders in properties built as single family dwellings. They do not fall within any of the exemptions contained in Note 22(a)–(d)” (para. 107).
HMRC will be disappointed to lose this case as the FTT was explicit that its long standing policy on roller blinds is incorrect. We wait to see whether the decision will be appealed. However, it is apparent from the FTT decision that HMRC did not present a good case, the decision contains frequent references to confusing and contradictory argument. This suggests that an appeal is unlikely.
[1] These are conjoined appeals by Wickford Development Co Ltd (“the appellant”) against:
- An assessment to VAT (and interest) issued on 18 August 2017 (for VAT periods 05/15 to 02/17) in the amount of £35,826.95; and
- An assessment to VAT (and interest) issued on 18 May 2018 (for VAT periods 08/14 to 02/15) in the amount of £6,625.63.
[2] As I announced at the conclusion of the hearing, I allow the appeals and set aside the assessments. I set out the reasons for my decision below.
[3] The appellant is a UK-incorporated, VAT-registered, property development company. It has a principal site at Woodlands Park, Great Dunmow, Essex. At the date of the hearing before me, approximately 1,000 homes had been built, with a further 600 left to be developed and sold.
[4] The question for me to decide in this case was whether the supply of window blinds by the appellant (in the context of its property development trade) should be zero-rated for VAT, allowing the appellant to claim input tax on the same.
[5] Ms Black noted in her submissions that the VAT treatment in question relates both to the periods under appeal and also to subsequent (and future) VAT periods. This is no doubt true, but my decision in this case will of course only bind HMRC (subject to any appeal) in respect of those VAT periods under appeal and it does not of itself set any binding precedent as to any future periods of time for the appellant or generally. Though the appellant might reasonably hope that HMRC would apply the law as set out in this decision for future periods.
[6] This case concerns part of the UK's VAT legislation which is commonly described as the “Builder's Block”, under which input tax which would otherwise be deductible in respect of expenditure on goods incorporated in a new dwelling and are supplied by way of a zeror-ated supply is rendered non-deductible.
[7] The Builder's Block operates through the application of various parts of the Value Added Tax Act 1994 (“VATA” – all statutory references in this decision are to that Act unless specified otherwise) and The Value Added Tax (Input Tax) Order 1992.
[8] Ms Black's skeleton argument helpfully set out the scheme of the legislation and I have gratefully taken the legislative extracts in the Appendix to this decision (which set out the law as it applied throughout the periods subject to these appeals) from that.
[9] There have been a number of cases on the Builder's Block. The provisions have been recently – and, insofar as this Tribunal is concerned, authoritatively – examined by the Upper Tribunal in the Taylor Wimpey cases (considered below).
[10] The precise issue in this case has come before this Tribunal once before, in Price [2011] TC 00873 (Judge John Walters QC).
[11] Two features distinguish Price from these appeals: first, Mr Price was appealing a decision made pursuant to the DIY Scheme – but this difference is immaterial as the relevant provisions are in all material respects identical; secondly, Judge Walters decided the relevant points on the basis of findings of fact he had reached by judicial notice. The significance or otherwise of this was addressed in submissions and is dealt with below.
[12] The decisions of the Upper Tribunal in the Taylor Wimpey plc v R & C Commrs [2017] BVC 505 cases are binding on me (insofar as relevant to this appeal). Conversely, the decision of this Tribunal in Price is not directly binding, and I may depart from it if I consider that it was wrongly decided.
[13] It is relevant that following the decision in Price, HMRC released Customs Brief 02/11 on 25 January 2011, which stated:
HMRC's position
HMRC's view remains unchanged in that roller blinds (and other “window furniture”) are not “building materials” as defined and will not be changing its policy. The Tribunal chairman did not hear any evidence on the point of what is and what is not a “building material” for VAT purposes but reached his conclusion as a matter of judicial notice, that is, as a common sense fact.
Given the small amount of VAT at stake in this particular case, HMRC will not be appealing this decision further.
[14] For the appellant, I had witness statement evidence from Stephen James Hammond (a consultant surveyor providing contractual services to the appellant), Paul Andrew Tayler (the contracts manager and company secretary of the appellant) and Nigel Jonathan London (the owner and managing director of Claudius Designs Limited, which supplies blinds and fittings to the appellant and other property development businesses). Each witness statement included a number of exhibits.
[15] Each of Messrs Hammond, Tayler and London gave sworn (or affirmed) evidence and their witness statements were accepted as their evidence in chief without amendment. Their evidence is set out at [17] to [38] below.
[16] For HMRC, Mr Qureshi did not introduce any evidence. Furthermore, his cross-examination of the appellant's witnesses was limited as described below.
[17] Mr Hammond has over 28 years' experience in the building industry and property development. During that time, he has worked in the building trade, construction management, and educational teaching role, as a Local Authority Building Control Surveyor and for the appellant as a consultant surveyor.
[18] Mr Hammond briefly described the appellant's history as a property developer and its involvement in the Woodlands Park site, as well as the demographic of the property purchasers.
[19] Mr Hammond's witness statement included evidence as to the appellant's marketing of the Woodlands Park properties:
[13] Wickford deliver homes to a steady programme of one completed home per week over a 50-week period, annually. Wickford employ traditional build techniques meaning that the build programme is approximately 9–10 months for each house. Each home is then allowed a natural drying out period of approximately...
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