Despite a recent draft of the public notice on Construction (708) disallowing zero rating on full design and build contracts, HMRC has now made a U-turn on this decision.   

It has always been the case that HMRC accepted that a design and build contract was a route to avoiding standard rate VAT on professional architect fees.  Essentially the fees became part of an overall contract of new build services and were thus also zero rated when supplied on with such services.  Obviously this route needs to be carefully planned and contracts worded appropriately, but the potential savings to developers or more importantly charities were huge.

Although the recent draft confirmed that professional fees would become standard rated under these contracts and should be apportioned appropriately, it has now been confirmed, by members of the Charity Tax Group who pressurised HMRC to withdraw the changes, that the proposal will be scrapped.

For further information contact Zaenia Rogers or call on 01962 735350.