Q- I have a client who is carrying out extensive building modifications to a disabled person’s home. He has had conflicting advice from various contacts in the trade about VAT. Can all the work be zero-rated or are there limitations?
A- Your client cannot automatically zero rate his supply as the liability will depend on the nature of the work supplied. There is no general VAT relief on building modifications for disabled people or on purchases of building or construction materials. However, a number of specific reliefs exist within VATA1994 Schedule 8 Group 12.
The Group 12 construction reliefs were introduced in 1984 when alterations,
extensions and home improvements such as fitted kitchens became standard rated. Initially, the only clear-cut case for relief was where a disabled person needed a downstairs bathroom or lavatory in his or her private residence where none already existed, or where doors needed widening or ramps constructing to facilitate the use of wheelchairs.
VAT law focused on bathrooms, washrooms, and toilets because it was considered that disabled persons were most likely to encounter difficulties accessing personal hygiene and sanitation facilities. Relief was also given to certain work designed to facilitate access, namely the construction of ramps, widening of doorways and passages.
Unlike most VAT reliefs, a supply of goods or services must meet all the following criteria before it can be zero-rated under Group 12:
- it has to fall within one of the qualifying descriptions of goods or services listed in Group 12;
- it must be supplied to a disabled person or to an eligible charity serving the needs of disabled person persons; and
- the goods must be for the personal or domestic use of the disabled person.
Group 12 allows zero rating of construction work as follows:
- Item 8. The supply to a disabled person of a service of constructing ramps or widening doorways or passages for the purpose of facilitating his entry to or movement within his private residence.
- Item 10. The supply to a disabled person of a service of providing, extending or adapting a bathroom, washroom or lavatory in his private residence where such provision, extension or adaptation is necessary by reason of his condition.
- Item 13. The supply of goods in connection with a supply described in items 8, 9, 10 or 11.
Because of the way item 13 is worded, using the phrase ‘in connection with,’ the materials do not, in this context, need to be supplied by the person installing them. If a builders’ merchant is satisfied that the work being carried out qualifies for zero-rating he can zero-rate the supply of materials on their own. This supply could be to an individual or to a builder. This is only the case where there will also be a supply of building services to the disabled person. It does not apply where the work will be done in a DIY capacity or when done free of charge by a friend or relative. The builders’ merchant should retain evidence that the materials are in connection with such a supply, and a written statement from the builder indicating the nature of the work for which they will be used, and maybe a copy of the customer’s declaration should suffice.
- Item 16. The supply to a disabled person of the services necessary performed in the installation of a lift for the purpose of facilitating his movement between floors within his private residence.
Other services performed, for example, the installation of central heating boilers, replacement windows or doors or the provision, extension or adaptation of bedrooms, dining, living or utility rooms, offices, kitchens or carers’ rooms are not zero-rated, even if the work carried out is to suit the needs of a disabled person.
HMRC allow by concession that where a bathroom, washroom or lavatory has to
be constructed or extended in a space occupied by an existing room such as a bedroom or kitchen, the restoration of a room which has had to be replaced to its original size, can be regarded as part of the work essential to the provision of the qualifying room.
Preparatory work and making good can also be zero-rated as can be the installation of goods that are eligible for zero-rating, e.g. plumbing in an eligible sanitary appliance, or installing a chairlift.
Where building adaptations are supplied for a child or a disabled dependent relative living with the householder, the supplies would technically be to the householder and not the disabled person. However, in these circumstances, zero-rating would normally be allowed.
A disabled person may qualify for a disabled facilities grant towards the cost of adaptations and facilities in their private residence to enable them to
continue living there. Local councils under Part I of the Housing Grants, Construction, and Regeneration Act 1996 give such grants and the council may pay the grant either directly to the disabled person or direct to the contractor.
If the grant is paid to the contractor the contractor’s records should ensure that the invoice clearly states that the work was done for the disabled person and that VAT was not charged on zero-rated work.
In all circumstances where any zero rating is appropriate, a written declaration of eligibility should be obtained from the disabled person before work begins. There is a suggested template in Public notice 701/7 “Reliefs from VAT for disabled and older people”.