HMRC have now extended the consultation period from 4 May 2012 to 18 May 2012.  This is good news for those interested parties who wish to make a response to the Government’s proposals to withdraw the zero rate from approved alterations to listed buildings.  It is still short of the 12-week consultation period that the Government aims for, and we understand that this is so that the measure can be introduced in this year’s Finance Act, which we anticipate will receive Royal Assent in the middle of July 2012, during the summer recess.

 ‘Binding Contracts’

The document issued by HMRC includes an extension for the zero rate where a binding contract was entered into prior to Budget Day (21 March 2012).  Where a binding contract had been entered into (duly signed by both parties), the zero rate for approved alterations can be extended to 20 March 2013.  This appears to be a woefully inadequate period of time for the completion of works for a large number of projects which are already in progress, and takes no account of projects in progress where there is no formal written contract in place, which is often the case with works to domestic properties. It could therefore be difficult for a contractor to provide evidence to support the zero rate beyond 30 September 2012. 

Contractors should bear in mind that contracts can be written, verbal or implied, and whilst hindsight cannot change what has gone before, any correspondence relating to the commencement of works should be useful in supporting an argument that there is sufficient ‘proof’ of entering into a contract prior to 21 March 2012.  A JCT (Joint Contracts Tribunal) contract should, in any case, be an acceptable binding contract for the purpose of these requirements.

If you would like to hear full details on the Governments proposals, you can listen to a recording of our webinar on the matter by clicking here.  The VAT Consultancy will be drafting a response to the consultation and we welcome any comments you may have. These should be emailed to karen.mulcahy@thevatconsultancy.com.