A special VAT Refund Scheme allows DIY house-builders and people converting non residential buildings into dwellings to reclaim VAT incurred on construction or conversion costs. This scheme is available when the building will be used for a non-business purpose. Constable VAT can advise on alternative options where a building is intended for business use.
HMRC has amended the rules in relation to the Scheme, effective on 5 December 2023 and new guidance has been issued, which can be viewed on HMRC’s website. The updated rules extend the time limits for making a claim in respect of buildings completed on or after 5 December 2023 and also allow for claims to be submitted online.
Although builders’ services in connection with the construction of a new dwelling are likely to be zero-rated, VAT will be incurred on any materials purchased directly by the owner.
Where a non-residential building is converted into a dwelling zero-rating is unlikely be available and construction costs are likely to carry VAT at 5%.
Under the DIY scheme, HMRC must refund any VAT chargeable on the supply, acquisition or importation of any building materials used in connection with qualifying construction or conversion work.
The scheme can be used to reclaim VAT on eligible goods used to construct a new qualifying dwelling, communal residential building or charity building and eligible goods and services used to convert a non-residential building into a qualifying dwelling or communal residential building. Claims must be completed and submitted within a strict time limit and this can be difficult to meet when combined with the other challenges a self-build or conversion offers.
We can advise on complex legal points that may prevent a successful claim as well as preparing and submitting a DIY claim on your behalf to help secure the maximum VAT refund on a given project. The VAT Tribunals deal regularly with cases involving rejected DIY claims and recently we have seen an increase in claims rejected because HMRC considers them to be ‘late’. Constable VAT keeps a close eye on these cases and is well placed to assist if your claim is rejected.
HMRC issued a Revenue and Customs Brief 8 (2022) following the FTT decision in the case of Andrew Ellis and Jane Bromley. This Brief clarifies that fact that it is HMRC policy that only a single claim is allowed under the DIY Scheme and this has not changed following that decision. However, where it is agreed that a claim has been repaid in error, HMRC will accept a subsequent claim with evidence that the claim has been made within 3 months of completion. Note: this time limit has been extended to 6 months for properties completed on or after 5 December 2023.
For further advice or help, please get in touch.