May 17, 2022

Article

Last September, the First-tier Tax Tribunal (“FTT”) ruled that HMRC were wrong to refuse a supplementary VAT claim, under the DIY builders’ scheme, in Ellis & Anor. Mr Ellis and his partner made a claim for VAT incurred at the point they first occupied the property, but at this stage, the project was a long way off being signed off by the Local Authority as complete. They then made a further claim a couple of years later, again before final completion sign off.

HMRC rejected the second claim, arguing (1) the second claim was too late and (2) that only one claim was permitted. The FTT rejected both HMRC arguments. “Completion” usually means when the Local Authority signs off the project as complete.

The FTT decided that as the work was not complete, neither claim was out of time, and HMRC was not entitled to specify that only a single claim could be made, so it directed HMRC to repay the second claim.

HMRC has not Appealed its loss in the above case, but judgements by the FTT do not set a binding precedent. Ideally, HMRC would have reviewed its policy and set out conditions under which DIY builders are permitted to make interim claims. This would have been helpful bearing in mind that many projects take years to complete and VAT refunds may be required to fund the completion of the works.

Instead, it has issued a Brief (“RCB 8/2022”) restating its position that a taxpayer can only make a single claim, which must be in a specified form and submitted within 3 months of the completion of the project. The claim must include evidence of completion which effectively precludes any early or interim claims.

However, on a case-by-case basis, HMRC may accept supplementary claims for invoices and works carried out before the claim was submitted, which may have been left out in error or invoices issued late by the contractor.

Further, HMRC has said that where it has been 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.

This may assist those who have previously submitted a claim before the works have been finally certified as complete, opening the door to an additional claim.

Conclusion

HMRC routinely rejects DIY claims that are not submitted in strict accordance with what HMRC says are the rules of the Scheme. Claimants need to take great care and seek professional advice where necessary.

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