How does death affect DIY VAT reclaim for builder?

DIY House builder reclaim after death - are the actions/intentions of the inheritors relevant?

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A client started to build his own house in 2010. His intention was to live in it with his grandson, moving from his rented council house on completion. His grandson died in 2014, and he was diagnosed with cancer, and the building project lost all impetus. He died in February 2018. His two sons inherited the property equally, and set about finishing it off. In May 2018 the local council issued the completion certificate (actually 2 of them - one in the name of the decesed who had applied for planning, and one in the names of the 2 sons). The sons asked me about a DIY VAT claim.

Both have their own houses, and were considering renting it out. How does this impact on the claim? The position if the client had lived would have been clear, in that renting would have invalidated the claim, but I am uncertain as to how or if the death and subsequent change of ownership alters anything. The claim would presumably be made in the name of the estate, so why would the intentions of the 2 sons be taken into account? Does the bequest have the equivalent effect of a sale? 

I would appreciate some guidance!

Replies (6)

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chips_at_mattersey
By Les Howard
27th Jun 2018 11:47

Renting out the property will invalidate the claim.
I would run the change of ownership past HMRC, and ask them to show discretion in dealing with it. I do not think there is an explicit legal provision for this situation.

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RLI
By lionofludesch
27th Jun 2018 13:02

Definitely don't rent it.

Propose to HMRC the estate will sell it and see what they say. It would be "just and reasonable" that the claim was allowed.

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Replying to lionofludesch:
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By WhichTyler
27th Jun 2018 13:28

But has the estate disposed of it already (to the two sons)?

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Replying to WhichTyler:
RLI
By lionofludesch
27th Jun 2018 13:39

I infer that the sons hold it as part of the estate but am happy to be corrected by the OP.

In a sense, it makes no odds. The situation will still be highly unusual and not covered, afaIaa, by legislation, be that statute, regulation or, indeed, case law.

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By DMS
27th Jun 2018 13:57

Thanks for your replies. At the moment, probate has not been granted, so technically the estate still holds the house, but the will leaves everything in equal shares to the 2 sons.
Would the sale by either the estate or the 2 sons to a limited company they jointly own allow the company to subsequently let the property without clawback?

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Replying to DMS:
RLI
By lionofludesch
27th Jun 2018 14:05

I think you should be open with HMRC and tell them what you want to do before you do it.

I don't think there are any rules and you may find them sympathetic. I'd be surprised if they allowed letting immediately on completion but you never know.

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