The Value Added Tax Act 1994 (the “Act”) is not what most would consider an exciting or enjoyable read. Yet, those undertaking the construction of a new home might consider a quick peek at section 35 of the Act.
Otherwise known as the DIY Housebuilder Scheme, section 35 enables recovery of VAT paid on certain building materials used in the construction of one’s home. Any claim for recovery of VAT must be submitted to HMRC within three months of completion of the building. As is the case generally within the construction realm, this leads to the question of what qualifies as completion? Here, the recent case of Liam Dunbar v The Commissioner for HMRC  UKFTT 0747 (TC) provides some useful guidance.
In Dunbar, the homebuilder submitted his VAT refund claim on 8 May 2018, some two and a bit months after receiving the relevant building regulations certificate of completion which was issued on 19 February 2018. However HMRC rejected the submission saying that the building works had been completed more than three months before the claim was made. This position was based (among other things) on the fact that the homebuilder had been residing in the property since 1 March 2017, notwithstanding that the house had only temporary electricity and water supply at the time and did not satisfy air permeability requirements until December 2017.
In assessing the matter, the First-tier Tribunal considered first whether there was scope for HMRC to extend the timeframe for claims. Reviewing the legislation, the Tribunal found it was bound by a previous Upper Tribunal decision which made clear that the timing for submission of a refund claim is non-negotiable – that is, HMRC has no discretion to extend the timeframe for submissions. In any event, the Tribunal felt the more pertinent question in Dunbar was the meaning of “completion of the building”.
For the Tribunal, the Act and associated legislation were clear: the certificate of completion from the local authority is “the primary evidence of completion” in relation to the DIY Housebuilder Scheme. While it is possible for a homebuilder to provide other evidence of completion, primacy is given to a certificate of completion from the local authority.
What does this mean for the DIY housebuilder? First, it must be remembered that this clarification on the meaning of “completion of the building” is specific to the particular context – that is the DIY Housebuilder Scheme. Thus, one must not presume the same evidence will be sufficient in relation to other definitions of “completion”, whether under a contract or other legislation.
Second, it is imperative to submit any claim within the required timeframe. Notwithstanding any ‘reasonable’ excuse (i.e. illness, issues with one’s professional tax advisor, etc.), based on case law, failure to make a claim within three months of issue of the certificate of completion from the local authority will be fatal to a claim.
More information about the DIY Housebuilder Scheme can be found at https://www.gov.uk/vat-building-new-home.
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