Mr Bloggs has a contract to build an extension to a house to accommodate a wet room and a bedroom for a disabled individual. The customer is in receipt of a grant from the local authority and is insisting the supply should be zero-rated
Certain supplies of building works provided to disabled customers can be zero-rated, but it is by no means a blanket exemption. The legislation in question can be confusing for the unwary although VAT Notice 701/7 does provide some clarification.
In Mr Blogg’s case item 10 Group 12 Schedule 8 VAT Act 1994 provides for the zero-rating of “a supply to a handicapped 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 means of his condition”.
This can also include other work essential to the provision of the facilities such as the installation of sanitary ware, preparation of footings, provision of facilities for drainage and utilities. As such your client will need to apportion his charges between the wet-room qualifying for zero-rating and the bedroom for which the work will be standard-rated. There is no prescriptive methodology for apportionment, but it should be a fair and reasonable reflection based commonly on either cost or market value.
If the customer is in receipt of a grant towards the cost of providing adaptations and facilities in their private residence to enable them to continue living there, the grant may be paid to the individual or direct to the contractor. If the grant is paid to Mr Bloggs as the contractor, he should make sure that the invoice clearly states that the work was contracted for by the individual disabled person to whom the grant was awarded. Furthermore, although it is not a legal requirement, it is highly recommended Mr Bloggs obtains and retains an eligibility declaration from the customer. An example of which can be found via the following link.