Monday, March 07, 2011

BLOG 101


The First-tier Tribunal held in the case of John Price v HMRC that roller blinds are building materials for VAT purposes. Accordingly Mr Price, a do-it-yourself builder, was entitled to recover the VAT that he had paid for such blinds when constructing his house.

HMRC subsequently put out an HMRC Brief which caught my eye. This says, “HMRC’s view remains unchanged in that roller blinds (and other “window furniture”) are not “building materials” and will not be changing its policy. The Tribunal Chairman did not hear any evidence on the point of what is and what is not a “building material” for VAT purposes but reached his conclusion as a matter of judicial notice, that is, as a common sense fact”.

The First-tier Tribunal is not a court and its decisions do not create precedents. HMRC are therefore entitled to ignore them. Their practice in relation to VAT seems to be to tell people that they are ignoring a decision if they think that other people will use it to reduce their VAT bills but to leave people guessing in most cases whether or not they intend to follow a decision. So there is nothing unusual in HMRC saying that they propose to ignore a Tribunal decision.

What caught my eye was the statement that, “the Tribunal Chairman did not hear any evidence on this point” HMRC were represented at the Tribunal. Did the Chairman put his hands over his ears. I doubt it. It is far more probable that he heard no evidence because HMRC chose not to present any to him. It seems to me outrageous for HMRC to, in effect, say, “We chose not to explain why we do not think roller blinds are building materials, so the Tribunal could not take account of our views because we hid them from him. Because of this we are entitled to ignore his decision as it took no account of our views”.

I do however quite like the bit about the judge reached his conclusion as a commonsense fact”, which is a further reason why HMRC think that it must be wrong! Everyone surely knows that commonsense is alien to VAT.

HMRC go on to explain, “It has never been HMRC’s policy that the zero-rate should apply to all goods that were incorporated into residential property by builders during its construction”. In the past HMRC have often told me that they do not make the law; their role is simply to enforce the law. If HMRC do not make the law, I do not understand how HMRC can have a policy on what should be zero-rated. Surely only people who make the law can have such a policy.

Actually in the John Price case the Tribunal decision recounts that, “HMRC rejected the claim in relation to the roller blinds because they considered that they were not “building materials”

… I accept that the roller blinds have been incorporated in the building in question in the course of the construction works – in argument Mrs Orimoloye [Counsel for HMRC] informed me that HMRC accept that VAT on curtain rails are eligible for refund on this basis”. Publication VAT 431NB is the notes to the claim form. It states “Goods (Building Materials) you cannot claim for: … curtains, blinds, carpets”. Notice 719, which is the detailed guidance for do-it-yourself builders, says, “Articles accepted as being “ordinarily” incorporated in a building are listed below. This is not a complete list: … curtain poles and rails”.

So what do HMRC really think? The HMRC brief states firmly that, “roller blinds (and other “window furniture”) are not “building materials” yet VAT 431NB includes blinds in the category of building materials, albeit not ones ordinarily installed by builders, and Note 719 says that curtain poles – which I would myself have thought of as “window furniture” - not only are building materials but are building materials ordinarily installed by builders. Poor Mr Price surely cannot be criticised for having decided from all this guidance that roller blinds are very different to simple blinds and much nearer to building materials than curtain poles. As Alice said, “Curiouser and curiouser”!



Post a Comment

<< Home