Conservatory roof panels not insulation for VAT

In Greenspace (UK) Ltd v HMRC [2023] EWCA Civ 106, the Court of Appeal (CoA) found that insulated conservatory roof panels were not insulation for the purposes of VAT-reduced rating. 

• Greenspace (UK) Ltd (Greenspace) supplied conservatory roof insulation in the form of insulated roof panels. Roof glass would be removed and the panels inserted to provide an insulated roof.
• Greenspace had charged VAT at the reduced rate of 5% on the basis that the supply was one of insulation for roofs and therefore 'Energy-Saving Materials' under Note 1(a), Group 2, of Schedule 7A to the Value Added Tax Act 1994.
• HMRC raised a VAT assessment of £2,581,092 on the basis that the supplies made by Greenspace should have been standard-rated.
• Following unsuccessful appeals to the First Tier Tribunal (FTT) and Upper Tribunal (UT), Greenspace Appealed to the Court of Appeal (CoA).

The CoA found that:

• The FTT made an error of law in concluding that if the supply was not of insulation for roofs it must have been the supply of a roof.
• The question was whether the supplies were ‘insulation for roofs’ using those words in their ordinary sense, applied strictly but not restrictively.
  • If the supply in question were of something more than, or different from, insulation for roofs, the reduced rate would not apply.
  • While a supply may have insulating properties, if that supply extends beyond what might fairly be described as insulation for roofs it will not fall within reduced rating.
• Greenspace was not making a supply of insulation for roofs.
  • The panels were manufactured with a waterproof aluminium casing with protective powder coating around the Styrofoam.
  • In the absence of those attributes, the products would be seriously defective because they would let the rain in.
  • It followed that, while the panels did provide insulation for the conservatory on which they were installed, they also protected the conservatory from the outside elements. This was something more than a supply of insulation for roofs.

Greenspace’s appeal was dismissed.

Comment

The CoA considered the Upper Tribunal cases of Pinevalue and Wetheralds. While the CoA agreed with the general approach and reasoning of both Tribunals, it did not accept that the relevant test was whether the supply was of insulation for roofs or a roof.

The true test was simply whether the supply was of insulation for roofs.   

The test in Pinevalue and Wetheralds went too far in suggesting a binary choice between insulation for roofs on the one hand and a roof on the other.

Useful guides on this topic

Energy-Saving Materials
The supply and fitting of energy-saving materials in residential accommodation attracts a reduced rate of VAT. What does it apply to? What are the qualifying conditions? What case law is there on this topic?

CIS: Construction Industry reverse charge
What is the CIS VAT reverse charge? How do you account for VAT? Can you still cash account for VAT? What administrative changes do I need in order to operate the reverse charge? 

External link

Greenspace (UK) Ltd v HMRC [2023] EWCA Civ 106