HT-2023-000006 - [2024] EWHC 2516 (TCC)

A & V’s Claim Form and Particulars of Claim (which went through several iterations) claimed VAT.

In respect of the amounts claimed by A & V (except the claims for amount for Mr Blizzard’s fees) the amounts I have awarded are net of VAT.

A & V submits, and J&BH accepts, that I have still to deal with the amount, if any, to be awarded in respect of VAT on the other amounts I have awarded.

The amount of £6,096.56 awarded in respect of loss of profit is an award of damages, upon which VAT is not payable.

On the other sums awarded, it is A & V’s position that 20% should be awarded in respect of VAT.

J & BH’s position is contained in paragraphs 17 to 19 of its Note prepared for the purposes of the handing down of the Sixth judgment:

17.

JBH reasonably assumed that the approach to VAT was common ground, given it was the approach the parties had adopted throughout the works on the Project.

18.

In particular:

(1)

JBH had made gross payments to A&V of £369,040.

(2)

It was common ground, as explained in Section B above, that this was a net, i.e. exc. VAT, payment of £364,909.64.

19.

The VAT payable on the Project was ratified by HMRC (via VAT audits) and has been applied to all previous payments to A&V.

(1)

The vast majority of the project was zero rated. The works were for new student accommodation, which is generally subject to zero rating (https://www.gov.uk/hmrc-internal-manuals/vat-construction/vconst15380).

(2)

A small part of the works (those relating to commercial areas) was subject to VAT at the standard rate.

(3)

The agreed approach was that 5.66% of the value of the Works would be subject to VAT (at 20%).

(4)

I.e. if the value of the works was £100, £5.66 of the works would be subject to VAT at 20%, giving VAT of £1.132 (or an effective VAT rate of c.1.1%).

J&BH has produced documentation which appears to me to support this case.

In those circumstances in my judgment I should add VAT at 20% on 5.66%, in the sum of £1,069.22, calculated as follows:

That is the sum which I award, but subject to this caveat, that there will be liberty to A & V to apply within 6 months of the handing down of this judgment to vary this order in the event that HMRC contends that the rate of 20% is applicable to the whole sum of £95,466.61. I make it clear that I grant this liberty in case HMRC disagrees with J&BH’s interpretation of the application of VAT, but I do not determine what is the correct interpretation.