VAT liability and exemptions for landscape work

The Association is regularly contacted by members regarding zero-rated landscape works, eager to ensure they are charging their client the correct amount of VAT when working on new properties. 

Hard and soft landscape work both have the potential to be zero-rated, but there are a number of caveats members must be aware of.

The reference document for this topic is Buildings and construction (VAT Notice 708) and is freely available online from the HMRC website. See the Further reading section of this article, below, for the full document. 

Two tests should be applied to ascertain whether landscape construction work is zero-rated:

1.      Work must be closely connected to building. 
2.      Work must be carried out whilst the building is still in the construction stage.

1.      Work must be closely connected to building. 

Landscaping works must be ‘closely connected’ to the construction of a building, as is described in section 3.3.4 of Buildings and construction (VAT Notice 708).  

3.3.4 Work closely connected to the construction of the building

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)

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 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 not zero-rated.  Planting of trees, shrubs and flowers in isolation do not normally fit into the ‘closely connected’ category, however, either seeding with grass or laying turf does.   

2.      Work must be carried out whilst the building is still in the construction stage.

Construction of the building must be ongoing for landscape works to qualify as zero-rated.  Section 3.3 of Buildings and construction (VAT Notice 708) includes the following detail:

Your services are supplied ‘in the course of the construction’ when you carry out:

- work on the building itself (including applying any usual decorative features) prior to completion of the building 
- any other service closely connected to the construction of the building 

Completion takes place at a given moment in time. That point in time is determined by weighing up the relevant factors of the project, such as:

- 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

Once construction is ‘complete’, any further supplies of construction services (other than those mentioned at paragraph 3.3.6) are no longer ‘in the course of construction’ and are thus ineligible for the zero rate.

HMRC provide examples to explain whether the house has been constructed or not:

Example 1

A developer is in the process of constructing a house for sale. The house buyer would like the house to include an attached conservatory and so contracts with a conservatory specialist to supply and install the conservatory prior to them moving in. The developer refuses the conservatory supplier access to the site until after they have finished their work and the house has been conveyed to the house buyer. In such circumstances, the supply by the conservatory supplier is not work ‘in the course of the construction’ of the house but work to an existing building and cannot be zero-rated.

Example 2

A developer constructs and sells ‘shell’ loft apartments for fitting out by the homebuyer. When the developer sells the lofts, their construction would not be ‘complete’. Future work to fit them out can be zero-rated until such time as they’re habitable.

Example 3

A non-fee paying school obtains planning permission to construct a building that will be used solely for a relevant charitable purpose. But due to limited funds, the extent of the work is scaled down and a smaller building is constructed instead. Funds are later obtained to extend and enlarge the building to produce a building of the same capacity as originally planned

Further reading

Buildings and construction (VAT Notice 708)