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HMRC internal manual

VAT Construction

Zero-rating the construction of buildings: are my services supplied ‘in the course of the construction’ of the building: temporal (time) connection

The second test that determines whether work is closely connected with the construction of a building requires the service to have a temporal connection with the construction of the building.

In its judgment in St Mary’s RC High School ([1996] STC 1091), the High Court elaborated on what it means by ‘temporal connection’:

Usually these services will be provided contemporaneously with the construction of the building or nearly so, but this may not always be the case. When it is not, it will be necessary to consider both the reasons for and the length of the delay before deciding whether or not the temporal connection is established. Questions of degree may be involved and the facts of a case may permit of two different views.

You can find examples of the existence of a temporal connection in Notice 708 Buildings and construction. This list is not exhaustive.

In St Mary’s RC High School ([1996] STC 1091), the High Court held that the construction of a school playground (which was due to have been built at the same time as the school but had been delayed for some four years after completion of the school due to a planning dispute over a public right of way) was not constructed ‘in the course of the construction’ of the school when the work was further delayed for some six years due to a lack of funds. Lack of funds is not seen as an acceptable reason for delay.

In The Trustees of The Sir Robert Geffery’s School Charity (VTD 17667), a new single storey school building was constructed between 1989 and 1992. It was designed to take a second storey. In 1998, when funds became available, a second storey was added to it. It was decided that the building had been completed in 1992, and that the 1998 works were not the continuation of the construction of a building.

In Hoylake Cottage Hospital Charitable Trust (TC00925), the Tribunal stated:

In our view the temporal period runs from 27 May 2009, when the developer’s liability ceased for phase 1 (even though the landscaping has still not been finished) until 18 October 2010 when the second phase started, a period of 18 months. All of the cases that we have been referred to indicate that the decisions depend on the facts of each case. The hospital could not function without the kitchen and laundry. That development was the second phase of the original construction work and is an integral part of the Hospital’s activities. It is accepted that the fundraising in itself would not be a grounds for allowing the time to run indefinitely. The activity is contemporaneous because a period of 18 months between the developments, coupled with the fact that the Commission for Social Care Inspection thought it was reasonable to allow the hospital to operate on a temporary basis until July 2010 is not an unreasonable delay in all the circumstances. We therefore find that Group 5 of Schedule 8 of the Act applies and the construction of the kitchen and laundry block is to be zero rated.