DIY Builders Scheme – VAT recovery issues

The DIY Builders Scheme allows DIY builders or converters to recover input VAT incurred on construction/conversion costs relating to property to be used solely for a residential or charitable purpose.

 

Mr Richard Hall appealed against HMRC’s decision to refuse input VAT recovery on a portion of the costs incurred in relation to the construction of a residential property. One condition of VAT recovery via this scheme specifies that a refund of VAT is only available on building materials if they were purchased prior to the date when the building “is deemed complete”. It was on the basis of this condition that input VAT recovery was denied.

 

However, when viewing Mr Halls case, the First-Tier Tribunal deduced that the supply of building materials also extended to the fitting of the materials within the property. Therefore, this supply should have been charged at the zero-rate of VAT. As VAT had been incorrectly charged on this invoice, Mr Hall was unable to recover this VAT from HMRC. As a result, the decision to deny input VAT recovery was upheld, albeit on a different basis to that originally argued by HMRC.

 

As highlighted by this case, there are many conditions to VAT recovery in relation to the DIY Builders Scheme that can result in input VAT recovery being denied with this VAT element becoming an irrecoverable cost. For assistance in determining whether input VAT is valid for recovery and in submitting a VAT refund of this nature, please call our free VAT helpline.

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