DIY builder wins VAT rebate

Posted: 11th March 2013

Scaffolding on OfficeA do-it-yourself (DIY) builder has won his fight for a substantial VAT rebate on materials he used in the construction of his new home. The first-tier tribunal accepted the taxpayer’s argument that payment of the tax refund was not precluded by a planning condition restricting occupation of the property to persons employed in the operation of an adjoining equestrian centre.

The taxpayer, who ran the equestrian centre with his wife, built his new home with planning permission that contained the occupancy condition. He claimed the VAT rebate pursuant to section 35 of the Value Added Tax Act 1994 which gives DIY builders the same right as commercial developers to recoup input tax incurred in the purchase of construction materials.

In refusing to grant a rebate of £10,568.38, Her Majesty’s Revenue and Customs (HMRC) pointed to schedule 8 of the Act which limits the DIY building exemption to dwelling houses the disposal of which is not prohibited by the term of any covenant, statutory planning consent or other provision. It was argued that the occupancy condition included in the planning permission amounted to such a prohibition.

Preferring the taxpayer’s construction of the planning condition and allowing his appeal, the tribunal ruled that it did no more than restrict the category of persons who could occupy the dwelling and did not prohibit its disposal or separate use from the equestrian centre.