Summary
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The Isle of Man Treasury has updated VAT Notice 708 MAN, explaining when the 5% reduced rate applies to construction, alteration, repair and maintenance services performed on qualifying buildings. The notice took effect on 6 August 2026, while construction services falling outside its conditions remain subject to the standard 20% rate. [gov.im], [gov.im]
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The guidance is relevant to VAT-registered contractors and subcontractors, as well as homeowners, charities and places of worship receiving qualifying services. It provides expanded examples covering eligible buildings, mixed-rate contracts, building materials and the respective VAT responsibilities of parties throughout the construction supply chain. [gov.im], [gov.im]
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Businesses should reassess tax codes, quotations and contract wording, particularly where projects combine qualifying and non-qualifying work. The updated notice confirms that electric vehicle charging points and manual blinds may qualify in appropriate circumstances, while artificial grass is no longer treated as qualifying building material. [gov.im]
Article
The Isle of Man Customs and Excise Division has issued an updated version of VAT Notice 708 MAN concerning the reduced VAT rate for construction services. The revised notice has effect from 6 August 2026 and explains the circumstances in which qualifying construction services may be taxed at 5%, rather than the standard 20% rate. [gov.im], [gov.im]
The reduced rate may apply to specified work carried out on an eligible building in the Isle of Man. Eligible properties can include buildings designed as dwellings, certain properties used for a relevant residential or charitable purpose, and places of worship. Subject to the detailed conditions, qualifying services may include alterations, extensions, repairs and maintenance, together with necessary building materials supplied as part of the work.
The updated notice contains a wider range of practical examples. It identifies the supply and installation of manual blinds and electric vehicle charging points at eligible properties as potentially qualifying. Conversely, following a review of the meaning of “building materials”, the installation of artificial grass, including astro turf, no longer qualifies for the reduced rate. [gov.im]
The guidance also addresses projects involving supplies subject to different VAT rates. Contractors should therefore establish whether a contract comprises separate supplies or a single composite supply and ensure that any allocation between the 5% and 20% rates is supportable. Particular attention is required where materials are supplied independently, since the reduced rate may depend on the materials being supplied in conjunction with qualifying construction services.
VAT-registered contractors and subcontractors should update estimating, invoicing and project-review procedures to reflect the revised examples. Existing projects should also be checked where invoices will be issued after 6 August 2026. Businesses should retain evidence supporting the nature of the building, the work performed and any allocation between different VAT rates.
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