HC Deb 02 April 1984 vol 57 cc370-1W
Mr. Fisher

asked the Chancellor of the Exchequer whether his proposals for extending value added tax to alterations for home improvements will apply to those (a) started, (b) invoiced but not completed, (c) invoiced and completed but not paid for, (d) formally constructed but not completed, (e) formally constructed but not started, (f) paid for, but not started and (g) paid for but not completed before the date of introduction.

Mr. Hayhoe

The normal VAT rules governing a change of liability will be applied. Because the change in liability is from zero to standard rating, the act of invoicing for a job prior to 1 June has no effect. The basic tax point rule for supplies of services is that tax becomes due when the work is completed, but receipt of any payment for the job prior to the date of completion of the work overrides that basic rate point to the extent of the payment. Where a service has been started but not completed on the date when the liability changes, then the supplier is entitled to apportion his supply in some reasonable way so that only that part of the job done after the change in liability is governed by the new liability.

The vital date is of course 1 June 1984. The following examples may help illustrate the position:

  1. (i) job started and finished before 1 June—not liable even if invoiced and paid for on or after 1 June;
  2. (ii) job started before 1 June but not completed until on or after that date — wholly liable unless the builder 371 apportions his work (which he would normally do). The apportioned charge in respect of work done for the period on or after 1 June would be liable at the standard rate;
  3. (iii) work not started until 1 June or later. Whole job liable at standard rate.

(ii) and (iii) are overridden by the builder receiving payment from his customer. Receipt of payment for the whole job before 1 June means that the builder would not be accountable for any tax on the job. Receipt of part payment before that date would mean that he was not accountable for any tax in respect of that payment. He would be accountable for any payment received after 1 June and would normally want to recover the tax from his customer.

The rules set out above apply to the supplier irrespective of the date or terms of any contract. Under section 42 of the VAT Act 1983, a supplier is entitled to recover from his customer any increase in VAT for which he, the supplier, is accountable unless otherwise provided for in the contract. In fact I am advised that the standard form of building contract published by the Joint Contracts Tribunal and widely used in the building industry provides for the contractor to recover any additional VAT imposed after the making of the contract.