Updated guidance: VAT recovery on building materials

HMRC has issued updated guidance to confirm that, with effect from 5th October 2020, it now accepts that manual window blinds and shutters are “building materials” for VAT purposes and therefore eligible for zero-rating by contractors and VAT recovery by DIY builders.

This is a welcome change and will reduce VAT costs for self-builders, as well as:

  • Property developers who include roller blinds in new homes they are selling, and who have previously blocked VAT recovery on the purchase of these items;
  • Housing associations including roller blinds in low-cost homeownership units have also blocked VAT recovery in the same way.

What does this change mean in practical terms?

  • If you are a contractor supplying and installing certain roller blinds and shutters as part of the construction of new dwellings, you should be zero-rating the goods as well as your installation services. If you have charged VAT on these items since 5 October 2020 you should issue a credit note for this VAT. HMRC’s revised guidance doesn’t contemplate VAT adjustments being made for earlier periods but businesses may wish to consider this;
  • Similar rules would apply if you are installing certain blinds and shutters as part of the conversion or refurbishment of a residential building where the building works are subject to 5% VAT;
  • If you are developing new homes for sale and have incurred VAT before 5 October 2020 on roller blinds and shutters but not recovered it, this is now seen as an error and you are entitled to go back four years to correct this in line with other VAT errors;
  • If you cannot recover VAT and believe you may have been overcharged VAT in the past, you may have to convince your supplier to put in a claim to HMRC and pass any refunds on to you; and
  • If you left these items off any claims under the DIY builders’ scheme, unfortunately there is no mechanism to correct this if the time limits have now passed.
  • HMRC’s revised policy only applies to manually-operated roller blinds and shutters which are now accepted as being ordinarily incorporated into new houses. VAT on electric roller blinds is still blocked from recovery.

If you would like further information regarding this, please get in touch with Carolyn Van Hecke or your usual contact at MHA Moore & Smalley.