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Deadline extended for DIY housebuilder VAT claims

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HMRC has announced that individuals building their own home or converting a non-residential building will have the option of submitting their DIY housebuilders VAT refund claim digitally from 5 December 2023.

28th Nov 2023
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As part of HMRC’s continuing mission to move taxpayer interactions online and away from telephones and post, HMRC has announced the digitisation of self-build DIY claims, although the traditional paper format is still available for those not ready for the digital revolution.

The self-build DIY scheme exists to place an individual who is building (or converting) their own home in the same VAT position as someone who purchased the house from a property developer.

When engaging with a builder/contractor in the construction of a new-build dwelling (or conversion into a dwelling), the builder/contractor would zero rate their supplies of labour, and also materials when installed by the contractor (labour). With the DIY scheme, the individual can reclaim VAT on the costs of building materials they have purchased themselves.

Submitting a claim

The individual can then submit a claim to HMRC at the end of the project, with HMRC refunding the individual the VAT element on the cost of those materials purchased. The individual would complete a form VAT431NB (for new-builds) and form VAT431C (for conversions). 

The form has a series of questions to ensure the conditions for a claim are met and includes a number of pages to list all of the individual purchase invoices (date, supplier name, description of supply, total paid and so on) and each claim is supported by submitting original invoices and receipts for each and every transaction/purchase listed.

A claimant can only make one claim and that claim must be made within three months of the building having been completed. There have been many tribunal cases on what “completed” means. HMRC’s opinion of completion is when the dwelling has been finished according to its original plans and the three months start from the date of the document the applicant submits as proof of their completion date. (There can be various documents that support the completion date and indeed the completion date can be subjective at times.)

Completion can cause many different issues: the property might be habitable but not signed off by the council or planning officer for instance, or the individual may have moved in despite it not being signed off.

Time limits and submitting online

HMRC has announced that from Tuesday 5 December 2023 applications can be submitted electronically. They can still be submitted using the manual forms too.

In addition, HMRC will extend the time limit for making a claim. The current three-month deadline from completion will be extended to six months from completion. There still remains the matter of when completion has taken place, although in most cases it will be clear.

Further, the incoming changes will also see the list of documents required to be submitted at the time of the claim omit invoices, but include such evidence relating to the residential conversion from a derelict building or shell as may be specified by HMRC.

Money pit

Anyone with experience of self-build DIY claims will know that HMRC’s performance in this section has deteriorated considerably since Covid. Before then the turnaround times were not brilliant either, with claims often taking four to six months to be processed or claims being rejected because one or two invoices out of 500 were not correct, resulting in the whole claim being rejected and needing to be resubmitted. Delays here cost the individual money as often their mortgage or finances are reliant on a speedy VAT refund and several months can really take the shine off your new home.

The opportunity to file online and submit fewer documents sounds brilliant. Online at least captures the data digitally and in the right format, some basic verification can be undertaken at the input stage on screen and this can allow HMRC to process those applications quickly. One would hope there is some element of artificial intelligence or automation that will perform a quick check for obvious errors and pull out unusual or odd transactions that can then be enquired into without rejecting or delaying the process.

Whether the changes will speed things up remains debatable. This is not HMRC’s first foray into digitising processes – for example the VAT652 voluntary disclosure of errors form can be submitted online, as can options to tax and of course VAT registrations – but online submissions have not guaranteed quicker turnaround times, so while the ability to submit DIY claims digitally is the right move, whether or not claimants can get their refunds quicker remains uncertain for now.

Claims remain the same

There are no changes to the overall conditions for making a claim. The individual must ensure that the correct rates of VAT are charged by contractors (zero or reduced rated), not all material costs can be reclaimed, the scheme mirrors the general zero/reduced rating rules for new-build dwellings and conversions such that some materials cannot be reclaimed. These include Agas or range cookers (unless they also heating the property), white goods, furniture, audio equipment such as built-in speakers, intelligent lighting, and consumables like sandpaper or white spirit.

Replies (4)

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Morph
By kevinringer
29th Nov 2023 09:41

I don't see any mention of agents. We handle these for clients and send a paper 64-8 to HMRC with the claim. To date, HMRC have always recognised the 64-8 and will communicate with us. How have HMRC built agents into the digital claim? How are agents authorised, is this another digital handshake?

Thanks (0)
VAT
By Jason Croke
30th Nov 2023 08:56

Good question Kevin.

I don't know the answer as yet, HMRC published very little guidance on this at the time of me writing the article and I can't see any further updates from HMRC on this as yet.

It wouldn't surprise me if HMRC have not thought about agents, things like postponed import VAT, enrolling for Customs Declaration Service and similar can't be done via the agent login, must be done via the taxpayers gateway.

As for 64-8, there was nothing in the press release to indicate HMRC would not recognise an agents 64-8, on saying that, more aspects of HMRC seem to ignore the 64-8, for example VAT groupings and options to tax requires a written authority from the taxpayer, a 64-8 no longer acceptable to HMRC.

Let's see how this one pans out.

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Replying to Jason Croke:
Morph
By kevinringer
30th Nov 2023 09:18

Thanks Jason, HMRC are increasingly refusing to recognise the 64-8. In addition to the services you have listed, we also have most of the new ASA services eg TRS, IRV, 60-day CGT. It can't be a technology thing because MTD VAT is a new ASA service and HMRC did recognise the old authority for that. There never was a 64-8 for CJRS yet when HMRC launched the CJRS portal HMRC deemed us authorised and gave us access for all our employer clients. I guess the difference is HMRC knew that agents had to be involved to make CJRS a success, but HMRC want to cut out agents from everything else. I guess this could be political; if a tax system requires agents, it implies it is too complex for the typical citizen and removing the agent gives the illusion that the tax system is less complex.

Thanks (1)
VAT
By Jason Croke
07th Dec 2023 09:16

HMRC have now released their guidance and activated the online portal.

Unsurprisingly, agents cannot submit these claims.

I've just tried using my agent log in and it says agents can't use this service, this means taxpayers will have to use their own gateway to submit DIY claims or else agents will have to log in and file under the taxpayers login with their written consent (and the risks to the agent associated with doing so).

All the new links here https://www.gov.uk/government/collections/vat-refunds-using-the-diy-hous...

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