Supplies of building materials by contractors: goods supplied with reduced-rated services
Provision allowing reduced-rating
The law that allows reduced-rating for building materials is as follows:
- for reduced-rated residential conversions (VCONST06000); Value Added Tax Act 1994, Schedule 7A, Group 6, Item 2
- for reduced-rated renovations or alterations (VCONST07000) with effect from 1 June 2002; Value Added Tax Act 1994, Schedule 7A, Group 7, Item 2.
Conditions for reduced-rating
For the ‘goods’ element of a builder’s supply to be reduced-rated, all the following conditions must be met:
- the goods must be building materials (VCONST02000)
- they must be supplied with reduced-rated services (delivered goods are therefore always standard-rated)
- those services must include the ‘incorporation’ of the building materials in the premises concerned or its immediate site.
Reduced-rated services and goods that are not building materials
If goods that are not building materials are incorporated in a building, both the goods and services elements are standard-rated, because they do not fall as a qualifying service (VCONST07610).