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The First-tier Tribunal has issued the long-awaited decision in this case. The issue under scrutiny was whether VAT incurred by the taxpayer on the purchase of goods (known as 'white' goods) that it installed into new houses could be reclaimed. The UK operates a 'blocking' order which the taxpayer challenged. The order blocks the reclaim of VAT incurred on white goods where the goods are incorporated into new dwellings unless the goods are regarded as goods which are 'ordinarily installed as fixtures' in such buildings. Taylor Wimpey had a number of arguments. Firstly, it contended that input tax was claimable in full as the goods were not 'incorporated' into the dwellings. It argued that the dictionary definition of the term 'incorporated' should be preferred such that the goods had to become combined or united into the fabric of the building. The goods in question did not do so and, it was contended, as a result, the goods could not have been incorporated into the building. The Tribunal dismissed this argument confirming that the term 'incorporated' really meant incorporated into the single supply of a new house. Any white goods supplied as part of such a single supply are 'incorporated'. Taylor Wimpey's second argument was that the goods – such as cookers, fridges, freezers, dishwashers and washing machines etc- were not within the blocking order because they were goods which were 'ordinarily installed'. The Tribunal found that, on the evidence, in the majority of situations, the goods were not 'ordinarily' (in the sense of commonly or usually) installed. The Appellant's final argument was that the blocking order was, itself, ultra vires. The Tribunal found that this argument did not particularly help the taxpayer. The judge confirmed that if the taxpayer wished to rely on EU law to disapply the UK's blocking order, EU law would then apply to the supply of the white goods. There is no right to zero-rating available under EU law and, as such, any supply of the white goods would be taxable at the standard rate. Such an outcome would have the effect of eliminating the taxpayer's claim. The Judge was sufficiently confident in her findings that she refused the taxpayer's request to refer the EU law issue to the Court of Justice. Comment – this is a very long (80 pages) and complex decision which, given the amounts of VAT involved (potentially over £60 million in this case alone) is likely to be appealed to the Upper Tribunal and beyond. Taxpayers with similar claims will, no doubt, be disappointed with this decision. However, this is not likely to be the end of the road and the outcome is still very uncertain.
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First-tier Tribunal
Taylor Wimpey
The First-tier Tribunal has issued the long-awaited decision in this case. The issue under scrutiny was whether VAT incurred by the taxpayer on the purchase of goods (known as 'white' goods) that it installed into new houses could be reclaimed. The UK operates a 'blocking' order which the taxpayer challenged. The order blocks the reclaim of VAT incurred on white goods where the goods are incorporated into new dwellings unless the goods are regarded as goods which are 'ordinarily installed as fixtures' in such buildings.
Taylor Wimpey had a number of arguments. Firstly, it contended that input tax was claimable in full as the goods were not 'incorporated' into the dwellings. It argued that the dictionary definition of the term 'incorporated' should be preferred such that the goods had to become combined or united into the fabric of the building. The goods in question did not do so and, it was contended, as a result, the goods could not have been incorporated into the building. The Tribunal dismissed this argument confirming that the term 'incorporated' really meant incorporated into the single supply of a new house. Any white goods supplied as part of such a single supply are 'incorporated'. Taylor Wimpey's second argument was that the goods – such as cookers, fridges, freezers, dishwashers and washing machines etc- were not within the blocking order because they were goods which were 'ordinarily installed'. The Tribunal found that, on the evidence, in the majority of situations, the goods were not 'ordinarily' (in the sense of commonly or usually) installed. The Appellant's final argument was that the blocking order was, itself, ultra vires. The Tribunal found that this argument did not particularly help the taxpayer. The judge confirmed that if the taxpayer wished to rely on EU law to disapply the UK's blocking order, EU law would then apply to the supply of the white goods. There is no right to zero-rating available under EU law and, as such, any supply of the white goods would be taxable at the standard rate. Such an outcome would have the effect of eliminating the taxpayer's claim. The Judge was sufficiently confident in her findings that she refused the taxpayer's request to refer the EU law issue to the Court of Justice.
Comment – this is a very long (80 pages) and complex decision which, given the amounts of VAT involved (potentially over £60 million in this case alone) is likely to be appealed to the Upper Tribunal and beyond. Taxpayers with similar claims will, no doubt, be disappointed with this decision. However, this is not likely to be the end of the road and the outcome is still very uncertain.
For further information in relation to any of the issues highlighted in this Case Alert please contact:
The Regions Stuart Brodie [email protected]
London/South East Karen Robb [email protected]
The Midlands Mike Sheppard [email protected]
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