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Where Taxpayers and Advisers Meet

DIY vat reclaim

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Joined: Fri Mar 22, 2019 3:45 pm

Re: DIY vat reclaim

Postby wellington » Fri Mar 22, 2019 7:07 pm

Completion Date....... I am in the same position. I am building (nearly finished) a 17,000 sq ft house, a true self build, in my 14th year and have put in a VAT claim before it is signed off by building control because it is taking so long to build. I feared I would be making the claim too early but HMRC advised I could use the VOA as completion certificate which was a temporary issue back in 2011 when we moved into part of the house. HMRC have refused the claim saying house was finished by Nov 2016 and my claim is late. I have a full 20 page surveyors report saying it is not finished according to the plans passed. My claim is £60k. They will not budge after 8 months of arguing. Any helpful thoughts?

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Joined: Wed Aug 06, 2008 3:09 pm

Re: DIY vat reclaim

Postby les35 » Mon Mar 25, 2019 10:19 am

I am running a similar case due at Tribunal this summer I think.
From conversations with other advisers, it seems clear that HMRC are applying a much stricter test as to when a dwelling is complete.
I'll look out for your decision, Dave.

Posts: 58
Joined: Mon Jul 20, 2009 4:37 pm

Re: DIY vat reclaim

Postby davebrownvat » Thu Apr 04, 2019 11:03 am

UPDATE: things have moved on since my last update. Many professionals have been talking to HMRC at quite a high level and two of my newer cases have been allowed (I have been advising another 6 or 7, at various stages of the reconsideration/appeal process - and I lodged two Tribunal appeals last week)

As regards my original case, it was at the Tribunal yesterday and I believe it went quite well. There were two main arguments, as well as the general unfairness of HMRC changing their policy. (They deny that, of course.)

1) The legislation states (loosely) that the claimant shall furnish "a Certificate of Completion, or other evidence such as HMRC might require. The judge raised the point in a slightly interesting way, that you might be able to rely on the Cert Of Completion (if you have one) and not need to bother with any other form of evidence. That fits in with HMRC guidance - 5 mentions of Comp Certificate, but only one mention of the other forms of evidence.

2) The amount of work that was carried out after HMRC's notional completion date. There was quite a bit, in this case.

If we win on point 1, it is likely to assist other claimants; if we win on point 2, it won't, as the general rule with Tribunals is that they are personal to the claimants and their individual circumstances. Each claimant will have slightly different, or vastly different circumstances, so it's certainly worth considering the Tribunal route

And if we lose, I reckon that the next step will be complaining to HMRC, as one of the biggest injustices here is that everyone affected has adhered to the to HMRC's guidance in the VAT 431C and 431NB. As well as going down the reconsideration/Tribunal route, I've also been advising clients to complain to HMRC (and their MP) in the first instance and if that fails, complain to the Adjudicator's Office. Being misled/misdirected by HMRC isn't really a Tribunal matter - they can only deal with the law.

I'll keep you posted.

Posts: 58
Joined: Mon Jul 20, 2009 4:37 pm

Re: DIY vat reclaim

Postby davebrownvat » Mon Apr 15, 2019 3:06 pm

Further update - we won at the Tribunal, however, this was 100% based on the precise circumstances of my clients situation - the amount of work left to do when she moved in. In that light, it might not be of a great deal of assistance to anyone else. Having said that, it is in the right direction and if you can demonstrate that there was a fair amount of work to be carried out before you got the Completion Certificate, then you might be in with a shout.

There was little mention in the decision about the legislation, but it might be worth trying that in your case, if there is not much outstanding work to be done, prior to Completion.

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Joined: Mon Sep 30, 2019 8:44 pm

Re: DIY vat reclaim

Postby GethWP » Mon Sep 30, 2019 9:10 pm


I am going through similar challenges with VAT and am now awaiting tribunal date.

I submitted my DIY claim in Dec 18, however HMRC disputes that my house was completed in 2016. I had my completion certificate in Dec 18.

I did not have a lot of invoices after 2016 as some of the materials I had stored and just needed to do the work.

My main points to dispute with HMRC are:

1) Guidance is steered a lot towards completion certificate
2) I have invoice from Electrician stating final works was completed in Nov 18.
3) Although there was not a significant amount of work left to do in the last couple of years, there was work to do to complete. HMRC does not state significantly complete it says complete and my house was not complete.
4) If I believed that I could claim before hand what reason would I have to defer?

Any advice would be appreciated as I am planning on representing myself. Could you please advise if this will be court hearing or telephone conference call.

Many thanks

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Joined: Tue Mar 12, 2019 9:20 am

Re: DIY vat reclaim

Postby sqeel » Tue Oct 01, 2019 8:26 am

I'll be facing the same issue myself in the near future, having moved in four years ago and taken my time finishing things off sufficiently to get a completion certificate.

This recent tribunal case is extremely helpful:

I don't know whether HMRC is appealing, but if they don't (or they do and they lose), this case represents the end of HMRC's vendetta against those who move in before obtaining a completion certificate.

I'd recommend reading the entire case, but the most relevant points are here:

42. From the statutory wording, the Tribunal finds that the meaning of ‘completion’ under reg 201(a) is to be given the plain meaning as referential to a certificate of completion for the following reasons:

(1) Applying the ordinary rules of statutory construction, the plain meaning of ‘completion’ under reg 201(a) is to be defined by the issue of a certificate of completion under reg 201(b)(i). It is a clear-cut definition for ‘completion’ that enables the claimant and the Commissioners to establish the common ground, and for the efficient administration of the refund scheme so that there is no cause for ambiguity or dispute such as the present case.

(2) The primacy given to a certificate of completion is evident in the statutory wording; it is the sine qua non for the purposes of a VAT refund claim under the DIY Scheme. The statutory wording makes it clear that the preferred document is a certificate of completion, and it is only in the absence of which that the alternative should be provided in substitution.

(3) It is only in the absence of a certificate of completion that the Commissioners would entertain a claim based on the alternative. What is satisfactory as an alternative is not specified by the statute in like manner as a certificate of completion. HMRC’s guidance notes in relation to question 14 of the claim form then come in to fill the gap.

(4) ‘If you do not have a Completion Certificate yet, we will accept one of the following documents’, states the guidance notes (see §7). From the word ‘yet’, it can be inferred that the alternative documentation is one that can be obtained before the house builder is able to obtain a completion certificate. In other words, the alternative documentation to a completion certificate has the effect of enabling the house builder to bring forward the claim ahead of the issue of a completion certificate.

(5) Per the guidance notes, the alternative documentation that is satisfactory to the Commissioners are: a habitation letter or a Joint valuation Board Notice of Tax Banding (Scotland); a VOA (England and Wales); a District Valuer’s Certificate of Valuation (Northern Ireland); or a letter from a certified lender in relation to a loan secured on the new-build.

(6) The alternative documentation is to serve as evidence of completion, to enable a claim for a VAT refund to be made before a new build has obtained its completion certificate.

(7) The provisions under reg 201(b)(ii) to (v) concern the validity of the input VAT being claimed, by reference to the valid invoice from a registered supplier, in relation to the goods being imported, and in relation to whether the goods so claimed are genuinely used in the making of the supply of a new dwelling. None of these provisions pertain to the meaning of ‘completion’ for any further possible meaning of completion to be drawn after reg 201(b)(i).

43. In conclusion, the statutory interpretation of reg 201(a) is that ‘completion’ is referential to the issue of a certificate of completion. For the purposes of a VAT refund claim under the DIY Scheme, the only definition in terms of ‘completion’ is by reference to the documentation stipulated to evidence completion under reg 201(b)(i).

44. The stipulation cannot be clearer; it is either by way of ‘a certificate of completion obtained from a local authority’ or by alternative documentation as specified in the guidance notes. The proof of ‘completion’ for the purposes of reg 201 is by way of documentation, and documentation alone.

45. There are no extraneous definitions to the meaning of ‘completion’ within reg 201 that can be extracted from the statutory wording as pertaining to the date of occupation, or to the date of the last invoice being included in the claim. We therefore reject both of HMRC’s interpretations of ‘completion’ as without any basis in law.

46. It is plain from the statutory wording that a bright-line definition is to be given to ‘completion’ by reference to the stipulated documentation alone. The definition of ‘completion’ is not to be founded on circumstantial factors, which are in turn subject to different documentation to establish. The date of occupation, or the date of last purchases are not provided as possible alternative points of completion in the statute, not to mention that these are facts that need to be established by evidence that has no reference in the statute whatsoever.

47. If two different dates of completion as reckoned by HMRC were indeed possible according to the statute, then the relevant provision would seem to us flawed in its conception because: (a) it would promote ambiguity in establishing ‘completion’ subject to arbitrary documentation as evidence, and (b) it would allow such wide margin of difference, with the range of some 8 years between the possible date of 23 December 2008, and a later date of 2 June 2016. Such ambiguity and wide margin in establishing ‘completion’ cannot be desirable in providing for an efficient scheme for administering refund, and cannot be the intention of the legislature.

The purpose of the DIY Scheme

48. The literal interpretation that ‘completion’ in reg 201 has to be given a clear-cut definition as referential to the date of a completion certificate alone is further supported by a purposive construction of the provision.

49. The supply of new dwellings is a zero-rated supply. For this reason, a VAT registered developer in the business of building new dwellings can apply for a zero rated certificate so that no VAT is borne on the purchase of materials for building new homes. On a purposive construction of reg 201, a VAT refund is to compensate a DIY house builder for the input VAT he has borne in making the self-supply of a new dwelling, and to put him in the same position as a developer who is VAT registered.

50. Regulation 201 is a mechanism to give effect to the EU principle of fiscal neutrality, so that a DIY house builder eventually can obtain the supply of a new build dwelling at zero-rate.

52. On a purposive construction of reg 201, we reject HMRC’s interpretation that the date of completion can be arbitrarily set as the date of occupation: ‘Usually a property isn’t occupied until it is complete’ (per ADR exit document). Not only is this interpretation non-permissible as a matter of statutory construction, but in the context of the DIY Scheme, it is not unusual that a DIY house builder starts to inhabit the building while works continue towards completion. For reasons as those related by Mr Farquharson, it is not uncommon for occupation of a new dwelling to take place before its ‘completion’ to plan; reasons such as to save the costs of running and renting an alternative home, or to take care of the property in its continual course of construction. In the present case, the occupation was the garage in the first instance anyway, and not of the main house.

53. We also reject HMRC’s interpretation that in the alternative, the date of completion should be set as the date of the last invoice being included for the refund. In B Bowley v HMRC [2015] UKFTT 0683 (TC), the appellant’s VAT refund claim was allowed, where the planning permission was granted in July 1982 and the completion certificate in June 1994. In the context of a DIY new build, construction often happens in bursts of activity, punctuated by periods of inactivity, as was in Bowley and in the present case. The timing of an invoice is often dictated by when funds become available for a purchase.

54. The date of the last invoice cannot be determinative as the date of completion, since the timing of when to draw a line by triggering ‘completion’ in the meaning of reg 201 is for a house builder to decide. It is reasonable to assume that in the normal course of event, a house builder will make a claim at the earliest possible juncture for cash flow reasons. It is then for a DIY house builder to decide when that earliest possible juncture should be, since by precipitating ‘completion’ through obtaining the relevant documentation, a DIY house builder is effectively foregoing the opportunity of making any future claim of what may turn out to be legitimate expenses as a matter of fact

55. In the instant case, if Mr Farquharson had stayed on in the new-build as he had intended to be his permanent home, he would have incurred further expenses in completing the dwelling to the original plan. From the photographs shown, we find seven rooms were incomplete in so far as a developer building a new dwelling to sell on to a home owner would not have been able to sell the property in that state as being ‘complete’. To that extent, HMRC have noted in the ADR exit document that one bathroom had no plumbing in place: a developer simply cannot sell a dwelling with a room specified as bathroom without any plumbing, let alone other essential features and fixtures required to make a room a bathroom, which were absent as noted above.

56. Mr Farquharson was in the invidious situation of not knowing whether he should precipitate the issue of a completion certificate, thereby foregoing any further claim of VAT refund on costs in completing the house to the plan (if he were to be required to do so) in order to sell the house.

57. As a matter of fact, the issue of the Certificate of Completion in the present case was brought forward before the dwelling was fully completed in order to make the sale of the house possible. In the final analysis, the incoming owner of the property who would have to complete the building works which would have qualified for the DIY Scheme, would no longer be able to make any claim for the input VAT borne in completing those unfinished rooms.

58. Finally, we need to highlight the arbitrariness of HMRC’s own interpretation by reference to invoice dates. In the review conclusion letter, HMRC stated that ‘the building is a fully functioning dwelling and that any remaining work is of a cosmetic or minimal nature’, which is to say that the remaining work is of a nature that is ‘postcompletion’. In the ADR exit document (and at the hearing), HMRC somehow seem to have conceded that the invoices in May 2016 in relation to ‘decorative materials’ before the sale of the house were ‘pre-completion’ for setting the completion date as immediately after these invoices. If the May 2016 invoices were for ‘decorative materials’, then the invoices were ‘of the cosmetic and minimal nature’ that should have been ‘post-completion’. The inconsistency within HMRC’s own interpretations is indicative of the arbitrariness of the respondents’ approach. To describe the ‘remaining work’ as of ‘a cosmetic or minimal nature’, while noting from the sales brochure that one en-suite bathroom had no plumbing seems to us, not only arbitrary, but a travesty in semantics. HMRC’s interpretation of completion by reference to the date of last invoices has no statutory basis; is self-contradictory; and is contrary to the principle of legal certainty.
Good luck.

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Re: DIY vat reclaim

Postby GethWP » Tue Oct 01, 2019 8:42 pm

Thank you very much sqeel

This looks like some very useful information

Posts: 58
Joined: Mon Jul 20, 2009 4:37 pm

Re: DIY vat reclaim

Postby davebrownvat » Mon Oct 07, 2019 12:06 pm

The Farquharson case should have been the end of this nonsense - a good decision by the judge, on legal grounds. Being a Tribunal case, however, it is not a legal precedent. I understand that HMRC are not appealing the decision, but nor are they changing their policy. Words (almost) fail me. There has been another case decided in September by the name of Stewart Fraser, ( where the judge acknowledged the Farquharson decision but chose not to follow it - instead choosing to concentrate when the property was actually completed. (ie when most of the work had been done and the claimant moved in.)

For anyone still pursuing it, the Farquharson case is the best example to rely on. You can represent yourself and the Tribunal does go out of their way to assist anyone without professional representation. The Hearings can either be in an office block (just a big room), or in a Tribunal centre (again just a big room) or even (for a London case) in the Royal Courts of Justice - a court room setting, but not too intimidating. It's not too formal (no wigs etc) but formalities do exist eg standing up when the judge enters and leaves. The format is for the claimant to explain the background and his/her grounds of appeal. Then HMRC have their say; then you get the right of reply. The decision is seldom given on the day, more likely within the following couple of weeks.

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Joined: Mon Jul 20, 2009 4:37 pm

Re: DIY vat reclaim

Postby davebrownvat » Mon Oct 07, 2019 12:11 pm

One other thing I've been recommending to clients is a complaint to the local MP and a formal complaint to HMRC, on grounds that the DIY Team are taking action, where claimants have followed the HMRC guidance to the letter. What HMRC have also been doing is allowing some of the rejected claims on grounds of 'reasonable excuse', even where they have known about the full circumstances before they rejected the claims!

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Re: DIY vat reclaim

Postby sqeel » Mon Oct 07, 2019 2:53 pm

Interesting case, thanks. Quite interesting to see how differently the judge in this case interpreted the situation, although I appreciate that the circumstances are not the same. I note that the applicant didn't appear at the tribunal, and wonder what their supporting arguments looked like. Overall, this seems a poorly reasoned and unfair decision.

One other thing I've been recommending to clients is a complaint to the local MP and a formal complaint to HMRC, on grounds that the DIY Team are taking action, where claimants have followed the HMRC guidance to the letter.

At what point would you recommend doing this? Presumably ASAP after receiving an initial negative decision, in parallel with preparing to appeal?

What HMRC have also been doing is allowing some of the rejected claims on grounds of 'reasonable excuse', even where they have known about the full circumstances before they rejected the claims!

Do you mean that they're allowing initially refused cases as part of an internal appeal prior to it heading to the tribunal? If they're doing this while simultaneously arguing in front of the tribunal that the "time limit is absolute and that there is no discretion" (paragraph 16 of the Stewart case), then something is seriously wrong.

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