DIY claims – VAT on services

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The DIY scheme allows a person to claim VAT incurred on supplies of goods for his/her own house. The scheme puts the claimant in (almost) the same position as a commercial house builder. The rules are found in HMRC claim forms VAT431NB and VAT431C.

We see a few DIY claims, and note that claimants sometimes make errors in relation to claiming VAT. One misunderstanding is that, where the claimant engages a contractor to carry out specific works those supplies will be zero-rated. This is because they are supplies in the course of construction of a new dwelling. Further, supplies of the installation of builders’ materials into the fabric of the building are also supplies of services and are therefore zero-rated.

Where a contractor incorrectly charges VAT, HMRC will reject the claim. The claimant will have to go back to the contractor to have the VAT refunded. The contractor can adjust his VAT Account to correct this.

This is exactly what happened in the case of Ian Bushell. He purchased materials via his own building company. But the actual supply seems to have been of installed goods, which must be zero-rated. HMRC rejected the DIY claim in relation to those supplies, on which the VAT charged was around £28,000. He appealed to Tribunal, which had the easy task of dismissing the appeal. Unfortunately, by the time of the Tribunal Hearing the four-year limit had passed, so the supplying company had no opportunity to adjust its own VAT Returns.

COMMENT: HMRC are rejecting a significant proportion of DIY claims. Don’t give them a reason to do this. Claimants should seek advice at the start of the project.

You can read the Bushell case here: http://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07151.html 

About Les Howard

chips_at_mattersey

Hi, I am a VAT Consultant, working mainly with charities. I am based in Cambridgeshire

I have over 20 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.

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