The Upper Tier Tribunal has dismissed an appeal in the case of Anthony Barkas. The case was first heard at the First Tier Tribunal in March 2013, and concerned a DIY claim which HMRC rejected.
There is a regular stream of First Tier Tribunal cases concerning such claims. The most common question is whether Note 2(c) applies to the project, therefore making the project ineligible for the scheme.
Note two reads: “A building is designed as a dwelling where the following conditions are satisfied: (c) the separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning or similar provision.” (VAT Act 1994, Sch 8, Group 5, Note two defines a dwelling for VAT purposes.)
The Barkas case is different from many other DIY cases. This is because the offending clause related to a commercial building, adjacent to the dwelling which was the subject of the claim, rather than the dwelling which was adjacent to the commercial building or other property.
The effect of the clause was that it would be very unlikely the dwelling would be used or disposed of separately from the commercial building. But, was that a restriction on the separate use, or disposal of the dwelling?
The local planning authority, East Staffordshire Borough Council, imposed a specific condition: "6. The workshop/office within the application site shall only be used/operated by the occupiers of the dwelling hereby granted permission.”
At the time of the HMRC statutory review of the original decision, the Revenue wrote to the Council and described the development as a live/work unit, although it was always clear that there were two structures on the site.
HMRC, boosted by this apparent ‘support’ from the Council, rejected the claim, and so it proceeded to Appeal.
The First Tier and then Upper Tier, considered a previous case of Simon Jones  UKFTT 503, which addressed a similar practical arrangement.
The claimant made the simple argument that the planning permission prevented the separate use or disposal of the workshop/office, but did not prevent the separate use or disposal of the dwelling itself.
Appealing to the Upper Tier, HMRC continued their argument that the practical effect of Condition 6 precluded the separate use and disposal of the dwelling from the workshop/office. Their ‘legal’ case was that the First Tier Tribunal had failed to properly interpret the word ‘prohibited’ in Note 2(c).
The Upper Tier looked at the decision of Shields  UKUT 0453, which helpfully reviewed a number of FTT decisions relating to the DIY scheme. It also helped to expand on the meaning of ‘separate use or disposal.’ The UKUT cases of Shields and Barkas were heard in the same week in September 2014.
As part of the Upper Tier Appeal, HMRC applied to have additional documents put before the Upper Tier. These documents were part of the original planning application and decision, and HMRC had not brought them before the First Tier.
One wonders whether they were kept back at that stage. But the Upper Tier refused to accept these additional documents. It did work through the various documents made available to the FTT, to review the FTT’s approach to those documents. Whilst it found certain documents ambiguous in certain respects it found no indication that the FTT had misdirected itself as to the meaning of ‘prohibited.’
The Upper Tier’s role is to determine whether the First Tier came to the correct conclusion on the facts. It is not a re-hearing of the case, but a review of the approach of the First Tier. The Upper Tier did have access to the Shields UKUT decision, which was not available to the FTT. But that did not result in the FTT decision being overturned.
Anecdotal evidence would suggest that HMRC is rejecting more DIY claims, which forces the claimant to consider making an appeal to the Tribunal. The cases of Barkas and Shields, amongst others, will help determine whether such an Appeal is likely to succeed.
About Les Howard
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.