Temporary Buildings – VAT Treatment
It is sometimes necessary for temporary classrooms to be hired to cover increased pupil numbers or where other buildings are out of use for repair and maintenance. The VAT treatment of this area requires care by academy schools.
The supply of fixed buildings is exempt from VAT in the same way that land is usually an exempt supply (Schedule 9, Group 1 of the VAT Act 1994).
A recent case involving temporary classrooms installed on school tarmac tennis courts has explored the VAT treatment further and tries to distinguish between structures that are fixed to the ground and those that are movable.
The decision in R & C Commrs v Sibcas Ltd  UKUT 0298 (TCC) makes interesting reading.
This case found that, due to the way the buildings were installed, the structures were sufficiently connected to the ground and were difficult to dismantle that the supply was exempt from VAT.
This judgement will not be favourable to the hire company, as they will not wish to make VAT-exempt supplies due to the impact it has on the recovery of VAT on their costs.
Care is therefore required when reclaiming VAT on temporary building hire, as HMRC will deny repayment of this VAT where it has been incorrectly charged by the hire company.
Update: This case has now been appealed further. The Court of Session has passed judgement in favour of the company, reversing the VAT treatment above – for more details see this news item.