Housing Association - VAT Liabilities
This case involved a dispute between our client and its contractor regarding the VAT liability of demolition and subsequent construction under one overall contract. The contractor has demolished the existing building and is building new apartments for our client.
The demolition work was completed under a separate contract and then a new contract for imminent design and build entered into with same contractor. The contractor believes that the demolition must be subject to VAT. However the original tender document included both construction and demolition works therefore in our view all part of a single project and zero rated.
Our advice is that given that zero rating can be extremely advantageous especially where a VAT charge is irrecoverable, it is important to structure and plan contracts in advance to avoid confusion and take advantage of available reliefs.
