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.