Single or Composite Supply of Construction

The development of a holiday village raised some interesting VAT issues, particularly in relation to whether the supply provided was zero-rated construction services or a composite supply of construction services and procuring the landowners to grant a lease of the plot of land to the customer.

Fairway Lakes Limited were involved in the development of Fairway Lakes Village as a Management Company and made annual charges to tenants for the general upkeep of the area (e.g. roadways and grounds). Upon the granting of a lease by the landowner, the customer would also enter into an agreement with Fairway for these services.

Upon customer agreement to purchase a plot of land, a representative of Fairway Development Limited would contact them to agree specifications on the proposed construction of a lodge within the holiday village. The customer would then be informed that they would have to enter into a lease with the landowner and a building contract with Fairway themselves. The customer would then make payment of a deposit directly to Fairway under terms of an agreement. It was argued that this payment was given to Fairway to act alongside the landowner in granting a lease to the customer.

The First-tier Tribunal determined that these conditions signified the provision of a service that went beyond solely construction and that the supplies being made by Fairway were thus composite supplies of construction and procuring landowners to grant a lease of the plot of land to a customer (with the result that the supply attracted VAT at the standard rate).

The provision of composite supplies may affect the VAT liability they incur. To ensure you are treating the supplies you make correctly with respect to VAT, consult one of our experienced consultants on our free VAT helpline.

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