VAT liability and exemptions for landscape activities

Members of the Association may often be asked by clients to charge zero VAT for landscape construction works on projects that involve the completion of soft or hard landscaping elements on a self-build property or small development.

Whilst some elements of soft and hard landscaping on new buildings may be zero-rated, there are caveats associated with these and it is essential members take time to identify whether their works meet thresholds. 

There are two important tests concerning zero-rated work when it comes to landscape and construction:

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

1. Work must be closely connected to a building.

Work is closely connected to the construction of a building when it either:

(a) allows the construction of the building to take place, such as when a contractor:

• provide or improves an access point to a building site to allow deliveries to be made
• carries 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)

Note: The planting of shrubs, trees and flowers would not normally be seen as being ‘closely connected…’ unless these shrubs, trees or flowers are 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.

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

Landscape services must be provided whilst the building is in the construction phase. This means:

• work on the building prior to completion of the building 
• work on any other service closely connected to the construction of the building

Note: Construction is declared by weighing up relevant factors of the overall project, for example:

• 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 are no longer ‘in the course of construction’ and are thus ineligible for the zero rate.

HMRC provide some examples to help understand 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)

Understanding Landscaping and VAT