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July 22, 2020

To Build a Home: DIY Self-Build Refund Claims

If you build yourself a new home or if you convert a non-residential building into a home for you or your relative to live in as a main residence, you may be able to claim a VAT refund on building materials and services.

In order to be eligible for a refund, you must make a claim with HM Revenue & Customs (HMRC) no later than 3 months after the "completion" of the building.

P Wedgbury & S Wedgbury v HMRC - The Definition of "Completion"

The term "completion" is unfortunately not clearly defined in the legislation. However, in the recent case of P Wedgbury & S Wedgbury v HMRC (2020) the First-Tier Tribunal (FTT) considered the meaning of "completion" and therefore provides a useful guide for taxpayers who are looking to make a claim.

The Facts

  • P Wedgbury and S Wedgbury are two brothers who were gifted a plot of land by their mother. They decided to use it to build two detached properties in which they could each live with their families.
  • Following the grant of planning permission, they each started working on building their respective properties. As both taxpayers had full-time jobs, the works progressed slowly.
  • S Wedgbury and his family moved into their property in December 2012, and P Wedgbury and his family moved into their property in March 2013. At the time they moved into the properties, the works were not finished and many rooms were still not functional.
  • In May 2016, the Council attended the properties to carry out a Completion Inspection. The notes reported that there was work outstanding, including a disabled access ramp in one property and landscaping for another. This work was completed in December 2017 and the Council subsequently issued Completion Certificates in January 2018
  • The brothers made a claim for a refund of VAT under the Housebuilders' Scheme in February 2018, however HMRC refused the claims on the basis that they were submitted out of time.
  • The brothers appealed HMRC's decision.

The Case

As noted above, the definition of "completion" is not clear from the legislation. It was therefore up to the FTT to determine when the three-month time limit begins.

The brothers submitted that the completion date is the date of the Certificate of Completion (i.e. January 2018). As the claims were made within 3 months of that date, the claim should be allowed.

HMRC disagreed, and argued that the date of completion was the date the brothers moved into their respective properties, or alternatively the date when the final materials were purchased in mid-2017.

The Decision

The FTT disagreed with both the brothers and HMRC, holding that the properties were completed in December 2017 when the disabled ramp access and the landscaping was completed. The date of completion is a question of fact, taking into account the plans of the works, the time when the works sufficient to obtain a Certificate of Completion were completed, and the nature and extent of works which remained to be carried out after the certificate was obtained.

It was noted that the date of occupation cannot be the determinant of when a property is completed as a self-builder might move into a property when it is far from complete, or conversely might wait until long after the building is complete before moving in.

Furthermore, the FTT observed that the date of completion cannot be defined by reference to the date of the Certificate of Completion. The Certificate of Completion is simply evidence of completion, and by its very nature post-dates the completion of the works.

As the brothers' claims were made within 3 months of December 2017, their appeal was upheld and their claim for a VAT refund was allowed.

If you require assistance with claiming a VAT refund from HMRC or if you have any other UK tax queries, please feel free to contact a member of the team.

DIY Housebuilders' Scheme for VAT

Contact us today to discuss your tax requirements.
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