DIY Housebuilders Scheme – The Dunne case
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Mr Dunne applied for planning permission (PP) for a rear extension to his existing house, which was granted. After completion of the building works a Building Control Completion Certificate was issued which described the relevant works as “construction of a single storey extension to the rear” of the property. The appellant submitted a scheme claim which HMRC rejected.
The legislation which provides for DIY house builders to make a VAT claim is VAT Act 1994 Section 35 and Schedule 8 Group 5 which specifically excludes enlargements or extensions to existing buildings.
However, Mr Dunne’s evidence was that although the initial plan had been for the rear extension to be attached to the existing property, the plans were changed so that it became a standalone detached building, unconnected to the existing property and the building is therefore a detached bungalow. He discussed the changes informally with the local authority building control, who agreed that he did not need to build the corridor connecting the building to the existing property. The fact that they had issued the planning certificate was, he contended, evidence that the building was compliant with the planning department requirements and so should be regarded as being planning permission for a dwelling.
HMRC contended that, even without the corridor, the permission was for an extension of the existing building and not for a separate dwelling. The construction was not in accordance with the planning consent given by the local authority and so the claim could not be accepted.
The respondents further submitted that the building could not be disposed of separately to the existing building and that although the building had a separate postal address this did not create a separate dwelling.
The FTT found that for a claim to succeed, it is not sufficient that a standalone building was created; the planning permission must also be for a dwelling.
The relevant planning permission correspondence did not contemplate, let alone confirm, that approval was given for a new dwelling. The agreed informal amendment to remove the connecting corridor from the plans, cannot be interpreted to imply a grant of permission for a dwelling.
The appeal therefore failed.
It is crucial for a claim to succeed that all of the conditions of the scheme are met. Any deviation will result in a claim being rejected.
At UK VAT Advice we have significant experience in assisting DIY housebuilders with their VAT claims and meticulously check the validity of the claim before submitting it to HMRC to save time and expense.