VAT: DIY Housebuilders’ Scheme – The Brian Lawton case

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In the First-Tier Tribunal (FTT) case of Brian Lawton the issue was whether a second claim under the DIY Housebuilders’ Scheme was valid.

Background

Mr Lawton appealed against the refusal of HMRC to pay a claim submitted in respect of the conversion of a barn into a dwelling and subsequent extensions. Unfortunately, the project faced delays and increased costs due to the Covid-19 pandemic. He claimed a refund of VAT in June 2021, which HMRC repaid. The appellant submitted a second planning application for an extension, which was approved, and the work was completed in October 2022. He then made a second VAT claim October 2022 which HMRC refused.

The issue

Whether it was possible to make more than one single VAT refund claim via the scheme when the project was split into two specific phases. Planning permission was granted for two developments, the:

first permission was for the conversion of a barn to a dwelling
second permission was for an extension to existing barn conversion for two bedrooms

– whether the second claim was ineligible for a refund as an extension to an existing dwelling and whether decision to disallow claim for a VAT refund was correct.

Arguments

Lawton contended that it was possible to make two separate claims due to the distinct nature of the projects, and that his first claim had been erroneous since the barn conversion was uninhabitable.

HMRC’s view was that the second claim related to an extension to a dwelling and not the actual conversion and was consequently ineligible.

Decision

Despite the FTT being sympathetic to BL’s predicament in progressing the first application development at the time of the Covid pandemic and the lockdown with the financial and economic challenges these brought about, the appeal was dismissed.

The Tribunal considered that HMRC were entitled to insist that only one claim was made under the scheme in circumstances where there has been no repayment in error or invoices and works carried out before the claim was submitted and left out of account in error or invoices issued late by a contractor.

It considered that the first claim was the only one which could be made and was restricted to the stage of development that Lawton had submitted and was covered by the completion certificate of March 2021, being “the conversion of a barn to a dwelling”.

The court emphasised that completion for VAT purposes must align with original planning permissions and agreed with HMRC’s position that extensions to existing dwellings do not qualify for refunds under the scheme.

Legislation

The VAT Act 1994, Section 35.

Commentary

This case highlights how important both timing and adhering precisely to the rules of the scheme are. The cost of a self-build can be significant and recovering any VAT incurred is important to ensure budgets are met as far as possible.

Further reading

Background to the scheme here, ten top tips here and further information and other cases on the scheme: