Journal
Is My Kitchen VAT Free?
For clients building a new country house, zero rating VAT on new kitchens is both a perk and a grey area. It’s a topic which gets repeatedly raised and, as with much Government legislation, is not entirely clear (we’ve even had clients with their own tax accountants slightly beffudled!).
Guild Anderson is allowed to zero rate VAT on kitchen elements when working in a building which has itself been validated as a zero rated building. A valid certificate needed to be provided to allow us to do so.
Confusion
Much of the confusion around zero rating VAT on new kitchens centres around whether or not the product we are supplying clients is considered a ‘building material’.
Bear with us, as this phrase forms the centrepiece of the argument, with a building material deemed as ‘articles’ ordinarily ‘incorporated’ by builders into the building (block work, roof tiles, roof trusses etc).
These ‘articles’ do not extend to finished or fitted furniture (such as dressing rooms and boot rooms), but they do include the kitchen which is deemed a building product, not a luxury item (all houses need kitchens and therefore they are deemed as a necessity).
Incorporated
The word ‘incorporated’ is also a key word in the guidance, and for the purposes of the legislation, items that are ‘incorporated’ into a building are those that are fixed in such a way that removal would require the use of tools or result in the need for remedial work to the fabric of the building.
Examples of this are fitted kitchen furniture and built in/wired in or plumbed in appliances (eg dishwashers and extraction). However, hobs and ovens, which are plugged in and not plumbed in, are not ‘incorporated’ and thus the full VAT rate should be charged.
Flooring is VAT exempt (you need a floor), but carpets for instance are not. Sofas, tables chairs and so on are also not VAT exempt in a Zero rated building project .
Still with us?
Is the Aga or Everhot VAT exempt on a new build?
Further opacity surrounds the Aga or Everhot, with the guidance stating that most devices which are powered by electricity or gas are not building materials for VAT purposes, even if they are required to be incorporated into a building as a requirement of building regulations.
The guidance goes on however to state that items ‘designed by the manufacturers to heat space or water are deemed as building materials and therefore exempt of VAT in a zero rated new build project’.
We do know that a handful of tax inspectors have actually suggested that if an Everhot or Aga are installed into a kitchen with underfloor heating, its purpose to heat the space of therefore usurped, and VAT should be applied. We are also led to believe that when selling direct to the end users, Everhot always charge VAT.
Our response to this would be that the guidance states clearly that items designed to heat space are exempt, so whether you also have underfloor heating is a moot point and Aga or Everhot should therefore be exempt.
HMRC Guidelines
For those enjoying the topic enough to explore it further, the full guidelines on VAT, kitchens and new builds are published on the HMRC website under Notice 708
For those that just want to know whether we will charge VAT, or zero rate VAT on kitchens in new country houses, a quick and dirty summary is below:
We would typically Zero rate the VAT on the following items:
Kitchen cabinetry
Ironmongery
Installation
Painting
Extraction
Sinks and taps
Stone work surfaces
And we would typically standard rate the VAT on the following items:
Appliances (including Aga and Everhot).
As a caveat, we are not a tax accountant and while we have some experience in these matters, the interpretation of the guidelines is a little grey, and as such we ask that clients consult a qualified tax accountant on the correct interpretation of the law, not us!
Image courtesy of ADAM Architecture
