Change to VAT treatment of roller blinds confirmed

HMRC has confirmed it has changed its policy in relation to certain roller blinds and shutters installed in new houses and flats. HMRC now accepts that these are ‘building materials’ for VAT purposes and so eligible for zero-rating and VAT recovery by developers.  

This change is welcome and should reduce VAT costs, in particular for: 

• Property developers including roller blinds in new homes they are selling, who have previously blocked VAT recovery on purchasing these items;
• Housing associations including roller blinds in low cost home ownership units, who have previously blocked VAT recovery in the same way;
• Buy-to-let landlords, housing associations and other residential property investors who have previously incurred VAT on acquiring roller blinds; and
• Individuals building their own homes who are now able to claim VAT incurred on roller blinds as part of the DIY builders’ scheme.

What does this change mean for you?

The policy change was expected following the decision the First-tier Tribunal in Wickford and is effective from 5 October 2020, the date of this decision was published. Although HMRC’s brief of 11 May 2021 does not cover all of the potential scenarios, we understand that this means that the position is as follows: 

• If you are a contractor supplying and installing certain roller blinds and shutters as part of the construction of new dwellings, you should be zero-rating the goods as well as your installation services. If you have charged VAT on these items since 5 October 2020 you should issue a credit note for this VAT. HMRC’s revised guidance doesn’t contemplate VAT adjustments being made for earlier periods but businesses may wish to consider this;
• Similar rules would apply if you are installing certain blinds and shutters as part of the conversion or refurbishment of a residential building where the building works are subject to 5% VAT;
• If you are developing new homes for sale and have incurred VAT before 5 October 2020 on roller blinds and shutters but not recovered it, this is now seen as an error and you are entitled to go back approximately four years to correct this in line with other VAT errors;
• If you cannot recover VAT and believe you may have been overcharged VAT in the past, you may have to convince your supplier to put in a claim to HMRC and pass any refunds on to you; and
• If you left these items off any claims under the DIY builders’ scheme, unfortunately there is no mechanism to correct this if the time limits have now passed.

HMRC’s revised policy only applies to manually-operated roller blinds and shutters. VAT on electric roller blinds is still blocked from recovery. It does change the treatment of curtains; curtains are seen as removable items and so not part of the building, but curtain poles are building materials and so should be zero-rated. It also leaves uncertainty as to how items such as Roman blinds should be treated.

Further information

If you would like further information into this matter please get in touch with Adam Cutler or your usual Crowe contact.