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DIY claimants in an impossible position!

8th Jan 2020
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HMRC's current policy on DIY claims is leaving claimants in an impossible position, according to a recent Tax Tribunal case.

I was interested to read the Liam Dunbar FTT decision in light of on-going developments in relation to DIY claims. My understanding is that, around 18 months ago, HMRC significantly toughened their approach. The numbers of rejected claims seemed to increase quiet abruptly. (HMRC have not published any statistics of claims made, accepted, and rejected, as far as I am aware.)

Not surprisingly, the FTT, I understand, has seen a jump in the number of appeals. I represented one last year and I know of other advisers in the same position. The latest decision highlights the issue, I think.

HMRC have apparently revised their approach to the ‘completion’ of a project, quoting their own guidance in VCONST02530. This leaves the definition ill-defined! The problem for the DIY claimant is that he has to make his claim within 3 months of the date of completion. But, if he cannot easily determine that date, he is left in a difficult position. Further, HMRC frequently determine the date of completion many months later when they review (and reject) the claim. This again makes it impossible for the claimant.

The decision includes this critique of the current position:

44.         It must in our view be assumed that the regulations have been framed in a way which is intended to make it relatively straightforward for both the taxpayer and for HMRC to determine when completion of the building has taken place.  If, as Mr Hilton contends, the date of completion depends on all of the facts and circumstances, it would be almost impossible to be sure when completion had taken place.  Indeed, in Stewart Fraser, it is clear that the Tribunal itself was not sure when completion had taken place.  The judge says at [24-25] that:

          “24.    …...I find that the change in the plans was simply the rectification of a defect and the house had been completed by the end of 2015.

            25.      Even if I am wrong in that it was certainly completed by June 2016 since no further work was done thereafter.”

45.          This leaves the taxpayer in an impossible position.  If the Tribunal was right that completion had taken place at the end of 2015, a claim would have to have been made by the end of March 2016.  However, if completion had only taken place in June 2016, a claim made in March 2016 would not be valid as the claim would have been made prior to the completion of the building (which is not permitted by regulation 201 VATR).

I note that the decision reverts to the date of issue of the completion certificate, which had been HMRC’s previous policy.

Good.

You can read the most recent decision here: https://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07504.html

No doubt more similar decisions will follow.

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