VCONST02600 - Zero-rating the construction of buildings: are my services supplied ‘in the course of the construction’ of the building: snagging

Snagging is the carrying out of remedial works to correct faulty workmanship or replace faulty materials. Normally these works are carried out by the original contractor under the terms of the original contract and so are not seen as a separate supply of construction services.

However, circumstances may arise where the original contractor is not able to carry out the remedial works and another is contracted to carry out the works. This is seen as a separate supply of construction services:

• if this is made before completion of the building, it is a supply ‘in the course of construction’ and is eligible for the zero rate
• if this is made after completion, it is not a supply ‘in the course of construction’ and is ineligible for the zero rate.

This guidance does not provide information about how to determine if a building is complete. Information about what should be considered to make a determination can be found in VCONST02530. Guidance on VAT and construction more generally can be found in VAT Notice 708 (Buildings and construction).

Following the Tribunal decision in Mr and Mrs James (VTD 20426), a case related to the DIY Housebuilders’s Scheme, there may be circumstances where the defect is so bad that even though the building may now be occupied and a Certificate of Completion issued, the building cannot be said to be complete or fit for purpose. The court ruled that as a matter of fact and degree the construction was not completed at the time of the remedial works. In particular, the plasterer had provided visibly poor workmanship, and legal proceedings had commenced before the completion certificate was issued. In such circumstances, we accept that the supply of remedial works is a supply ‘in the course of construction’ and eligible for the zero rate so long as it is made at the earliest practicable opportunity.