Don't rely on others

The taxpayer company was subcontracted to provide scaffolding for halls of residence at two universities. Haymills and Leadbitters were the main contractors.

In December 2007 HMRC visited the taxpayer and found it had not accounted for VAT on supplies made to the contractors because neither had included VAT in the self-billed invoices they issued retrospectively to the subcontractor.

The VAT officer advised the taxpayer that although the hire of scaffolding must be standard rated supplies of erection and dismantling of scaffolding should be zero rated when the project was the construction of a university hall of residence. A fair and reasonable apportionment was required.

The advice was incorrect: under VATA 1994 Sch 8 group 5 zero rating only applies where such services are supplied ‘in the course of construction’. Only the main contractor makes supplies in the course of construction a subcontractor does...