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HMRC internal manual

VAT Construction

Supplies of building materials by contractors: goods supplied with zero-rated services: goods supplied without services

The relevant building materials must be supplied along with zero-rated services.

This has been confirmed by the High Court in M D and R W Jeffs t/a J and J Joinery ([1995] STC 759), which concerned the supply of roof beams, window frames, door and door frames, and so on, made to the customers’ specific requirements for use in alterations to listed buildings.

The items were made off site, usually following a site visit. If any items delivered did not fit, the taxpayers made necessary adjustments although they themselves didn’t install the items on site. It was held that there was a supply of standard-rated goods and, specifically, the fact that the goods were made to measure did not detract from that conclusion. The High Court stated:

…looking at the nature of such ‘services’ as it is contended the respondents supplied, they do not come even close to fulfilling the definition set out in [now VAT Act 1994, Schedule 8, Group 6, Item 2]. This was no more than… a contract for the supply of goods. The suggested services, which are submitted to form a wholly discrete and separate item, were in reality no more than the ‘common or garden’ obligations which attach in every case to a supply of goods pursuant for example to both common law and under the relevant section of the Sale of Goods Act. Accordingly… I am driven to the conclusion that… such services as were found to have been provided or offered either antecedent to or contingently subsequent to the supply of the articles in question, were in fact nothing more than the normal obligations imposed by law upon any seller of goods.

You should not accept argument based on the earlier High Court judgment in John Willmott Housing ([1987] STC 692), that goods not ‘incorporated’ by the supplier, but supplied ‘in connection with’ the construction of a zero-rated building, can be zero-rated. Since then the law has been changed, and the judgment in the above case is therefore based on old law.