Understanding landscaping and value added tax
A member recently contacted the Association regarding a request from a client in a recently constructed self-build property to zero-rate the VAT charged for landscape works. The member had previously worked on newly built properties and had not been asked this question before.
This question is regularly raised by Association members when working on individual construction projects, often self-built by the client.
The suggested reference document for this topic is available from the gov.uk website and includes detailed guidance on the types of landscape and construction works – as well as the circumstances - which may be zero-VAT rated.
Whilst buildings and construction (VAT Notice 708) specifies the types of hard and soft landscape works on new buildings that are zero-rated, there are a number of caveats which should be considered before assuming the exemption applies.
Landscaping works must be ‘closely connected’ to the construction of the building, as is described in section 3.3.4 of Buildings and construction (VAT Notice 708). Work is closely connected to the construction of the building when it either:
(a) allows the construction of the building to take place, such as when you:
- demolish existing buildings and structures as part of a single project to construct a new building or buildings in their place (the granting of a right to remove materials is not the supply of demolition services and is standard-rated)
- provide or improve an access point to a building site to allow deliveries to be made
- carry out ground works (including the levelling and drainage of land) as part of the process of constructing a new building or buildings in its place
- provide site clearance or ‘builders’ clean’ services
- secure the site
(b) produces works that allow the building to be used, such as works in connection with the:
- means of providing water and power to the building (this can extend to the work required to make the connection to the nearest existing supply)
- means of providing within the development site access to the building (for example roads, footpaths, parking areas, drives and patios)
- means of providing security (such as walls, fences and gates - but note that most electrical appliances are always standard-rated, further information is in paragraph 13.6)
- provision of soft landscaping within the site of a building (such as the application of topsoil, seeding with grass or laying turf)
A specific paragraph in 3.3.4 is key to understanding the significance of soft landscaping in a construction project:
The planting of shrubs, trees and flowers would not normally be seen as being ‘closely connected…’ except to the extent that it’s detailed on a landscaping scheme approved by a planning authority under the terms of a planning consent condition. This does not include the replacement of trees and shrubs that die, or become damaged or diseased.
It is therefore important to establish which parts of the landscaping are included in the planning consent conditions, as landscaping works which are in addition to the works specified above are unlikely to be zero-rated. Planting of trees, shrubs and flowers in isolation do not normally fit into the ‘closely connected’ category.
Due to the nature of landscaping being performed towards the end of a construction project, it is also important to clarify whether construction of the building is still ongoing. The reason for this is that, once construction is ‘complete’, any further supplies of construction services are no longer ‘in the course of construction’ and are thus ineligible for the zero rate.
Section 3.3.2 advises completion is determined by weighing up the relevant factors of a project, particularly:
- when a Certificate of Completion is issued
- the accordance to approved plans and specifications
- the scope of the planning consent and variations to it
- whether the building is habitable or fit for purpose
The last bullet point is particularly important; if a client has already moved into a single new house, it is therefore not under construction and any landscape works undertaken are unlikely to be zero-rated.
This article is for general guidance only. Association members may wish to contact Quest, which offers free advice on legal, HR, Tax and VAT to members for specific questions.