Supreme Court rules roof replacement company must pay £2.5 million VAT bill

A roof replacement company has been hit with a £2.5 million tax bill after a ruling that the insulated roof panels it supplied did not qualify for a VAT-reduced rating.

Greenspace (UK) Ltd supplied the roof panels to residential customers, which were fitted onto existing conservatory roofs.

But after First Tier Tribunal (FTT) and Upper Tribunal (UT) rulings, the Court of Appeal confirmed that the roof panels were not eligible for a VAT-reduced rating.

The FTT had rejected Greenspace’s appeal on the basis that their supplies could not be treated as anything other than a new roof or part of a roof. This was later upheld at the UT.

Energy saving

In the Court of Appeal, Greenspace argued that the panels were the supply of insulation for a roof or something more extensive, namely the installation of the roof itself.

The company had charged customers VAT at the reduced rate of five per cent on the basis that the supply was one of insulation for roofs and therefore ‘energy-saving materials’ under section 7A Value Added Tax Act 1994 (VATA).

However, HMRC assessed those supplies to be taxable at the standard rate of VAT and raised a VAT assessment on 17 June 2020 of £2,581,092 for the periods of December 2017 to December 2019.

Reduced rate

The company had argued that the reduced rate of VAT applied to the installation of ‘energy-saving materials’, which includes ‘insulation for roofs’.

Although the Court of Appeal held that while the panels did provide insulation when they were installed, they also protected the roof from the outside elements, which the court believed was something more than a supply of insulation for roofs.

The Court found that Greenspace was not supplying insulation for roofs (although the panels have insulating properties, they also have other characteristics), and accordingly the reduced rate of VAT did not apply.

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