VAT claim for self-build house - refused

[nad_mo]

I undertook a new self-build project with the original intent of re-locating from London to the Western Isles and living there (originally from there). The project over-ran and eventually took about 30 months to complete from full planning permission being granted. The work started immediately and since then my personal circumstances changed significantly (I was a single at the time, but since then I have met and married my wife, started a family, my career took a new and successful direction, etc), which meant that about 3 months prior to the completion (so 27 months into the 30 months construction time), I decided with my family that relocating was not in our best interests. As I cannot afford to keep an empty house in Scotland, I put it up for sale on the open market after completion.

Recently I have been refused my VAT refund claim on the basis that I changed my original intent to live there before I got the completion certificate in my hand, and been told that the decision is made based on intent at the time you have your completion certificate. I know that HMRC documentation (e.g. VAT 431 NB VAT Refunds for DIY house builders, and their website) does say that intent to live there is one of the eligibility criteria, and intent to sell is one criteria that makes you non-eligible, but I cannot see where in the official documentation it says that it is based on intent on the day of completion rather than original intent.

The rationale from HMRC for not accepting my claim is focused around when I changed my original intent, and essentially says to me that if I had changed my intent the day after I got the completion certificate, I would be eligible, but had I changed my intent the day before I got the completion certificate, I would not be eligible. If this is the case, I would have hoped this is clearly spelt out in guidance documentation available to the public (if it is documented, it is very well hidden). Just feels like a lack of transparency.

So given that for 27 of the 30 months of construction time my original intent never really changed, but as we neared completion of the build a final decision had to made, I have found my transparency and honesty to have worked against me here. HMRC do not seem to be that bothered about the fact my original intent changed - they just seem to be focused on the fact it changed before I got a completion certificate. I wonder how many people in reality would bury their heads in the sand until that completion date before making such a final decision??!

I feel that the HMRC decision has been taken as a result of me being fully transparent with them, and without taking into account my circumstances or the realities of the process families go through when looking a re-locating to another country. I am looking to appeal, but wondered whether you had any thoughts or suggestions?

[Kitty Kat]

I undertook a new self-build project with the original intent of re-locating from London to the Western Isles and living there (originally from there). The project over-ran and eventually took about 30 months to complete from full planning permission being granted. The work started immediately and since then my personal circumstances changed significantly (I was a single at the time, but since then I have met and married my wife, started a family, my career took a new and successful direction, etc), which meant that about 3 months prior to the completion (so 27 months into the 30 months construction time), I decided with my family that relocating was not in our best interests. As I cannot afford to keep an empty house in Scotland, I put it up for sale on the open market after completion.

Recently I have been refused my VAT refund claim on the basis that I changed my original intent to live there before I got the completion certificate in my hand, and been told that the decision is made based on intent at the time you have your completion certificate. I know that HMRC documentation (e.g. VAT 431 NB VAT Refunds for DIY house builders, and their website) does say that intent to live there is one of the eligibility criteria, and intent to sell is one criteria that makes you non-eligible, but I cannot see where in the official documentation it says that it is based on intent on the day of completion rather than original intent.

The rationale from HMRC for not accepting my claim is focused around when I changed my original intent, and essentially says to me that if I had changed my intent the day after I got the completion certificate, I would be eligible, but had I changed my intent the day before I got the completion certificate, I would not be eligible. If this is the case, I would have hoped this is clearly spelt out in guidance documentation available to the public (if it is documented, it is very well hidden). Just feels like a lack of transparency.

So given that for 27 of the 30 months of construction time my original intent never really changed, but as we neared completion of the build a final decision had to made, I have found my transparency and honesty to have worked against me here. HMRC do not seem to be that bothered about the fact my original intent changed - they just seem to be focused on the fact it changed before I got a completion certificate. I wonder how many people in reality would bury their heads in the sand until that completion date before making such a final decision??!

I feel that the HMRC decision has been taken as a result of me being fully transparent with them, and without taking into account my circumstances or the realities of the process families go through when looking a re-locating to another country. I am looking to appeal, but wondered whether you had any thoughts or suggestions?

Hi

The best I can do is say there is an example on the CCH site (within the members bit so I assume you can't get there) which says:

"Example: DIY builder

Mark is an insurance agent and builds a house in Cornwall for his impending retirement. He intends to use the DIY scheme to recover the VAT on the cost of building the house. However, he decides to delay retiring and rents out the house for a year before occupying it as his private residence.

Subject to the usual conditions, he can still recover the VAT because he is not already in business as a property developer or builder and he intends to use the building at some stage as his private residence."

Not exactly your case, but perhaps it will be a pointer for one of the more learned members of this site? It appears to me that so long as you aren't making a business of selling properties it should remain zero rated...

[Kitty Kat]

Hmmm, but perhaps the crux is that he still intends to use it as his residence...

Ok, maybe disregard most of what I said! Appologies.

[Generix]

I only skim read this:

But As I understand it you have built a new house (dwelling) and are now going to sell it?

(Ignoring DIY scheme and such)

Two options as I see it are:

(1) VAT register from current date (or 30 days back).
Recovering all your input VAT for goods in the last 4 years, and services for last 6 months. Sell property (zero-rated supply) then deregister.

(2) Apply for VAT registration from date you started building property and hope HMRC allow the EDR at the earlier date. Recover all input VAT on goods and services. Sell property (zero-rated supply) then deregister.

Disclaimer: It's Monday morning - so apologies if I missed something which obviously defeats this when skim reading it.