HMRC clarify VAT treatment of remedial building works

Revenue and Customs Brief 3 (2024) clarifies the basic VAT treatment of cladding remediation works carried out by developers to residential buildings. Usually VAT is incurred at the standard rate on goods and services purchased to complete such work unless the remedial work is linked to the initial construction of the building and that original work was subject to VAT at the zero rate or reduced rate.

HMRC’s more detailed Guidelines for Compliance GfC11 (help with VAT treatment of remedial works) cover ‘snagging’ where the remedial work is undertaken as part of the original supply of construction services and give examples of how to apply the VAT rules depending on the circumstances. The Guidelines also consider input tax recovery including scenarios where the remedial work costs have a direct and immediate link with the original construction or general activities of the business.