Cladding remediation works which are carried out on existing residential buildings can be zero rated for VAT HMRC has confirmed as long as the remediation has a ‘direct and immediate link to the initial construction’.
The department states in Business Brief 3/2024: ‘As the remediation works are carried out after the completion of the construction they can only be treated as ‘snagging’ if the work carried out is linked to the initial construction… If the remediation works are not part of the initial building construction they are subject to VAT at the standard rate.’
HMRC adds that to recover input tax businesses must consider whether there is ‘a direct and immediate link between the cost incurred and a specific output supply. The VAT may be treated as residual and recovered in line with the normal recovery on overheads where this is absent...
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