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HMRC internal manual

VAT Construction

HM Revenue & Customs
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Zero-rating the construction of buildings: are my services supplied ‘in the course of the construction’ of the building: services that ‘produce in their result one whole with the building’

The second alternative element of the first test that determines whether work is closely connected with the construction of a building requires the service to ‘produce in their result one whole with the building’.

In its judgment in St Mary’s RC High School ([1996] STC 1091), the High Court elaborated on what it means by ‘produce in their result one whole with the building’:

The answer to the question ‘Do the services produce in their finished result one whole with the building?’ will in some cases be obvious but in other cases not. It may be a question of degree especially in those cases where the connection is less obviously functional. It may in some cases be necessary to consider both the purpose of the building and the end product of the other services in question and to ask whether these additional works help the building to function in accordance with its purpose.

For example, a hotel built in parkland may not be able to operate without the adequate access and parking on hard standing of patrons’ cars. A school may not be able to function properly without a playground, so that the playground may properly be regarded as necessary and as much part and parcel of the school as its classrooms whether or not it is as important. A dwelling house in this day and age might not be allowed to be inhabited unless it was connected to available water and sewage services.

Function, though, is not the only test of whether the end result of the provision of services is one whole with the building. A patio or a park outside or around a house and steps to the front or back door obviously would be. The position would not necessarily be different if there were to be flowerbeds between the patio and part of the house walls. It could be a question of degree. On the other hand, laying out a large garden with paths and terraces might be regarded as a quite separate undertaking and one not falling within item 2. Again it is a question of degree.

In simple terms, the test is whether the finished works allow the building to function. For example, providing a means of access to a building are works that are ‘one whole with the building’ in that they allow the building to function, but constructing a tennis court in the grounds of a dwelling is not.

Conversely, remote works carried out at the same time, and which may be carried out as a result of a planning agreement, such as upgrading an existing local road, do not produce works that are ‘one whole with the building’.

You can find examples of accepted services in Notice 708 ‘Buildings and construction’. This list is not exhaustive.

Following the decision in Rialto Homes plc (VTD 16340), landscaping schemes carried out within the plot of a house are accepted as supplied ‘in the course of the construction’ of a building to the extent that they are detailed on a landscaping scheme approved by a planning authority under the terms of a planning consent condition.