Swimming Pool Construction – The Murky Waters of VAT

With a late August heatwave soon upon us, now might be the time to consider building that swimming pool that you’ve always dreamed of, however before doing so, it might be a good idea to consider the VAT implications on its construction before diving right in.

VAT and construction is a complex area, with numerous rules regarding whether the 20%, 5% or 0% VAT rate is to be applied. The construction of a new dwelling is subject to the 0% VAT rate, however when installing a swimming pool with a new build, certain aspects need to be considered, such as the type and placement of the swimming pool.

 Outdoor swimming pools located in the grounds of a property will never be zero rated. This is an unfortunate fact that means VAT will be suffered at the full rate of 20%. Even when built alongside the construction of a new dwelling, the swimming pool would not be contained within a building itself, meaning that the zero rate cannot apply.

We logically lead onto indoor swimming pools, which represent the most common way in which to obtain a zero rating for VAT on the construction, but the placement of the pool still needs to be considered in relation to the applicable VAT rate.

On construction of a new dwelling, an indoor swimming pool will only qualify for zero rating, if it can be considered part of the dwelling itself. This means that the indoor swimming pool needs to be directly attached  to (or enclosed by) the dwelling in order to qualify. If an indoor swimming pool is built in a separate enclosure that is not physically attached to the house, then the swimming pool is not part of the qualifying structure, and will be standard rated.

The rules are slightly different if you own a listed building. In 1995, the owner of a farmhouse constructed an indoor swimming pool connected to the farmhouse by a covered walkway. HMRC challenged that the construction should have been standard-rated, but the Queen’s Bench ruled in favour of the tax payer, that the work was an approved alteration to a protected building, and under the specific legislation, the work qualified for zero rating.

For the more luxurious constructions, there should be no reason based on rules case law, that an outdoor swimming pool constructed in the roof of a new dwelling should be considered standard rated, as the swimming pool would form an integral part of the dwelling itself, and thus should qualify for zero rating (however there is currently no evidence to show that this would be HMRC’s view on the topic). When completed, what better way to enjoy the fruits of your labour, saving 20% on the construction costs, only to enjoy the rest of the English summer… while it lasts.