Explanatory note

Article 2 of this Order amends Notes (1A) and (2A) of Group 8 of Schedule 5 to the Value Added Tax Act 1983 (as amended) and article 3 of this Order amends article 8 of the Value Added Tax (Special Provisions) Order 1981 (as amended).

Group 8 sets out the reliefs available by way of zero-rating for the construction of buildings etc and Notes (1A) and (2A) have the effect of excluding from zero-rating supplies that might otherwise fall to be relieved under various items within the Group. Note (1A) as amended will, with effect from 21st May 1987, additionally deny zero-rating to any extension or annexation to an existing building if it provides for internal access to the existing building, or if separate use, letting or disposal is prevented by the terms of any convenant, planning consent or similar permission. Note (2A) as amended will, from the same date, exclude from zero-rating relief carpets and carpeting materials when installed in the course of the construction of any building.

Article 8 of the Value Added Tax (Special Provisions) Order 1981 prevents the deduction of input tax on non-standard fixtures and fittings incorporated by a speculative builder in a dwelling which he is building for supply by sale or long lease. Article 8 as now further amended will, with effect from 21st May 1987, similarly prevent deduction when a person effecting works to an existing building intends to sell or grant a long lease on any dwelling resulting from his works. Also with effect from the same date carpets and carpeting materials will be added to the list of non-standard fixtures and fittings in respect of which input tax deduction is specifically prevented. This latter change complements and produces the same net effect for speculative builders as the amendment to Note (2A) does for contract builders.