VAT refund on new build home


VAT refund on new build home

Postby Orchardcattery on Thu Jun 25, 2009 10:44 pm

In January of this year I wrote about the refusal of our claim for a VAT refund on a newbuild. The problem is that we have a planning clause stating that the occupier of the house should be a worker in the adjacent cattery, and in HMRC's eyes that means it is not 'designed as a dwelling'. We appealed against this, but they have rejected our appeal, having gone through our planning appeal document with a fine tooth comb, and found plenty of evidence that planning permission was only granted in order to fulfil the needs of the cattery business. Our solicitor has advised us that he believes they have correctly interpreted the law as it stands, so we may have to accept the loss of the £13800 we claimed - a considerable sum of money!

Whilst the statements we made at appeal about the cattery business needing 24 hour supervision etc are true, what makes this so unfair is that had our land been within the boundary of our town, (in this case a few metres down the road), we would probably have been able to obtain planning permission to build our home without the need to prove a business case. The only reason given for refusal of our planning application was that it was outside the town boundary and therefore was outside planning policy. We had to prove on appeal that because of the needs of our business, our application did fall within the local authority's planning policy.

Presumably, had we been within the boundary and able to obtain permission without having to go into any detail regarding our business, we would have had no diffiulty re-claiming the VAT, as HMRC would have been unaware of what we did for a living! We would therefore argue that we are being refused the VAT refund on our home not because of WHAT it is (a perfectly normal 3-bedroom detached house), but because of WHERE it is (a few metres the wrong side of the boundary). I would further submit that EVERY house built in what the planners view as countryside will be equally disqualified from the VAT refund scheme, as the only houses that are permitted are those where a strong business case can be argued. We fall between the two stools of planning law, which forces us to make a business case if we are to succeed, and VAT law, which then disqualifies us for that very reason. We feel this puts rural dwellers at a distinct disadvantage from our urban counterparts, and we would doubt this was the intention of those who drafted the VAT law.

We accept that HMRC have stuck to the letter of the law, but would argue that they have ignored the spirit of the law and the reason why the occupation clause was imposed. We believe that an identical situation where the dwelling was situated in an urban area would have succeeded in reclaiming the VAT, and that if this is the case, then it needs to be tested whether there should be more consideration of the purpose behind the planning conditions imposed. We do not believe this has ever been challenged, so we are considering referring our case to a tribunal, representing ourselves. We have an outside chance of gaining our £13800, and have nothing to lose.

We would appreciate any comments you may have, and we would particularly be interested to know of any self-builds in the countryside which have succeeded in reclaiming the VAT.
Orchardcattery
 
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Re: VAT refund on new build home

Postby SeanJames on Sat Jul 04, 2009 8:52 am

Hello again,

DIY claims are successful all over the UK where there is no restriction, or covenant stating the purpose of their build - in your case - the requirement that the occupant works in the cattery;

Unfortunately, the "spirit" of the law tends not to come into VAT a great deal and HMRC will vigorously defend this stance all the way to tribunal and beyond. They've followed the letter of the law, which is correct, and unfortunately, I feel that the tribunal and any subsequent action would follow the same letter as well.

You mentioned that had the property been built a few meters down the road then there would be no problem, the problem I have with this, is that as it physically wasn't, then I would steer clear from using this as your main point of appeal. It would do you no good to state hypothetical reason to your appeal as that won't wash either I'm afraid. You also mention that it is probably that you could have obtained planning permission without the requirement of a business case, have you followed this up with your local planning authority to see if this is a definite? If you plan to take this to tribunal, then I would get this kind of evidence to support your claims as you will need all the help you can as you are up against the actual written legislation on the DIY claim.

All the best!

Sean
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Re: VAT refund on new build home

Postby davebrownvat on Mon Jul 20, 2009 4:42 pm

Hi
Presumably you quoted the following extract to HMRC, from their own guidance:

4.2.2 Is an occupancy restriction a prohibition on separate use or disposal?

No. Occupancy restrictions are not prohibitions on separate use or disposal and do not affect whether a building is ‘designed as a dwelling’. Common examples of occupancy restrictions include those that limit the occupancy to people:

working in agriculture or forestry, or
over a specified age.

(Extract from Notice 719)

Cheers
Dave
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Re: VAT refund on new build home

Postby brownproperties on Tue Jul 21, 2009 11:45 pm

Hi there,

Forgive me if this sounds a little naive , but wouldnt the simple solution to this be to VAT register the cattery business and then submit the claim on a normal VAT return to get the refund virtually straight away without the need to submit all invoices and planning permissions, etc.
Maybe technically not correct i know and could possibly trigger an investigation, but would be very difficult for HMRC to argue the case given the reasons they have already stated about the dwelling being connected to the business as grounds of refusal for the original case !!
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Re: VAT refund on new build home

Postby Orchardcattery on Wed May 19, 2010 8:18 pm

I've been asked for an update. I would love to be able to answer your question.... but I can't! We went to a tribunal hearing on March 10th, and are still waiting to hear now in the 10th week, and 18 months after our original claim. I phoned last week, but they couldn't tell me anything - it takes as long as it takes. There have been delays all the way down the line - correspondence being lost etc etc, so the first piece of advice is, if you do decide to pursue it, be very patient!
I think rather than go into the arguments we used at this stage, we ought to wait to see whether they were successful. If they are, I'll certainly give you whatever help I can. Not that I have any professional qualifications, but those who have will fight shy of you because it takes hours of time to prepare a case, and could be very expensive if there's a chance you won't win. Struggling with the loss of almost £14k put us at an immediate disadvantage - they had a solicitor and a barrister, so the case probably cost them more than the amount we were claiming!
Meanwhile it may help you to Google 'V1-6' This will get you to HMRC's guidance for deciding what is and what is not a business activity. Was the construction of your home a business activity when you apply their business tests? One of our arguments was that they didn't seek to apply this test when determining our decision.
In answer to the correspondent who asked why we had not registered for VAT and claimed back the input tax, we were advised by our accountant that we would only be able to claim for the small proportion of the house which is used as an office, and not for our private accommodation - see VAT guidance 700 paras 33.2 and 33.6.
I'll post the results as soon as I know them. I don't know how quickly they will post the decision on the web site for you to read
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Re: VAT refund on new build home

Postby Orchardcattery on Thu Jun 10, 2010 6:54 pm

Update - I'm pleased to report that the Tribunal allowed our appeal. The decision runs to 15 pages and has not yet been posted on the Tax Tribunals First Tier web site, but no doubt it soon will be - it's appeal number is TC/2009/11830, release date 8th June.

I think the most important aspect is that the judges have reinforced the statement in VAT Notice 719 which says that an occupancy condition does not constitute a prohibition on separate use or disposal. They state that 'the condition imposed related to the category of persons occupying the property, and in no way restricted its separate use or disposal'. HMRC had tried to argue along the lines that a house is used by being occupied, and that therefore a restriction on occupancy and a prohibition on separate use were the same thing. Hopefully, this decision will finally lay that argument to rest. The judges agreed that otherwise all rural properties would effectively be ruled out of the scheme, as permission is usually only given with a condition that the occupants must work in a specified business.
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Re: VAT refund on new build home

Postby davebrownvat on Thu Jun 17, 2010 3:34 pm

Excellent result, well done.

Regards
Dave
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Re: VAT refund on new build home

Postby Orchardcattery on Thu Oct 21, 2010 6:09 pm

After a long wait and a lot of prompting our tribunal decision has finally been posted to the website. It's decision no TC00737. Here's a link - http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=5105

Good luck to any country dweller still battling to reclaim their VAT because of an occupancy condition - I know of at least one from this forum. I hope this may settle the matter for you.
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Re: VAT refund on new build home

Postby Generix on Fri Oct 22, 2010 9:38 am

Orchardcattery wrote:After a long wait and a lot of prompting our tribunal decision has finally been posted to the website. It's decision no TC00737. Here's a link - http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=5105

Good luck to any country dweller still battling to reclaim their VAT because of an occupancy condition - I know of at least one from this forum. I hope this may settle the matter for you.


Great result again - and thanks for keeping us updated. :D
Do you adore to transfer your artistic and inventive qualities to renovate a part type? Perhaps your friends who tour your sanctuary head remarks about want they could levy you to change their premises.
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