Input VAT claim on Housebuilding

Input VAT claim on Housebuilding

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I have a self-employed builder who intends to construct a new dwelling for his own personal use. He is registered for VAT.

Will he be able to claim back all VAT on supplies bought for this new build via his VAT registered business even though all this expenditure will be classifies as personal drawings in his accounts, or will he have to use the ‘do-it-yourself’ housebuilders scheme?

I seem to recall a similar point being raised a while ago but cannot trace it.

Any thoughts gratefully received.

Replies (8)

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chips_at_mattersey
By Les Howard
19th Jul 2013 11:30

D-I-Y housebuilder

the VAT D-I-Y scheme provides for the client to reclaim VAT on materials for a new build.

Follow this link: http://www.hmrc.gov.uk/vat/sectors/consumers/new-home.htm

 

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Me!
By nigelburge
19th Jul 2013 11:46

Ummmm..............

Thanks Les - I know about the VAT D-I-Y scheme BUT....................

Can this client use it if he is already registered for VAT?

I seem to recall that there was a Tribunal case in this very point which prevented it but I cannot find it.

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Glenn Martin
By Glenn Martin
19th Jul 2013 12:04

Could he not do it himself

Could he not just do it through his company then transfer it at cost to his drawings.

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chips_at_mattersey
By Les Howard
19th Jul 2013 12:24

Sell to self

Can the client build the house and then sell zero rated to himself? Is it a genuine trading transaction? Would HMRC allow input tax relief in the business? All debatable points.

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By shaun king
19th Jul 2013 14:03

as an alternative

Why can't the client build the house for his wife or partner, although I can't see why HMRC should object building it for himself. The DIY scheme is there for those people who aren't registered for VAT and this guy is.

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By spidersong
19th Jul 2013 15:28

DIY scheme is for...

I'm afraid I'd disagree with Shaun, the DIY scheme is for people building a house otherwise than in the course of business, which is what this guy is doing. Whether they're VAT registered or not should be irrelevant.

Strictly S26 of the VAT Act only allows credit for VAT where that VAT is incurred in the course of business, if building your own house then you shouldn't be recovering the VAT as it's not in the course of business. As Les mentions it's debatable whether he can make a business supply to himself of the completed house, and it's not something that I'd be comfortable arguing if I were advising on this. If he will be living with someone else then you could use Shaun's idea of making the supply to them and the chances are that HMRC wont do anything about it.

HMRC policy used to be that a sole prop builder that did their own house wouldn't be assessed and told to do a DIY claim if they found out about it after the fact, but if they found out before hand they had to go the proper route. Current policy appears to be here: http://www.hmrc.gov.uk/manuals/vconstmanual/vconst24350.htm which seems initially to give the option of DIY or normal recovery and then goes on to say that normal recovery was only allowed prior to 2011, or that's my reading of it anyway, as ever HMRC like to makes things as clear as mud!

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Me!
By nigelburge
19th Jul 2013 15:56

Many thanks Spidersong.............

............that is exactly what I was after.

I agree with your reading of the Manuals and will advise my client to go down the DIY Scheme route.

He will be buying the materials etc via his business to get discounts etc but these will be treated as drawings.

I will also advise him to disclose to HMRC when he gets his DIY Scheme pack to disclose that he is a VAT registered Builder but that these works are not being carried out  ‘in the course or furtherance of any business’.

Thanks again.

 

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By Martin B
23rd Jul 2013 15:34

Input VAT claim on Housebuilding

Flagging

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