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DIY dilemma meant no VAT recovery


The planning permission required two walls to be left standing, but the DIY VAT rules said the building had to be demolished to the ground, leaving the taxpayer out of pocket.

12th Nov 2021
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As a general rule, the only way to recover VAT paid for goods or services is to make taxable supplies and become VAT registered. However, there are a small number of circumstances where an individual can recover VAT without a VAT number.

One such way, and the one I have seen most often professionally, is when a client builds a residence, usually to live in, but occasionally to sell. However, even then VAT recovery may not always be possible, as the case of Stuart Hackett attests.

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Replies (5)

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By Paul Crowley
12th Nov 2021 12:53

This case demonstrates that the letter of the law defeats the intentions of the relief
Sympathy to the taxpayer, HMRC could have used its Managerial discretion
HMRC rarely seem to consider Intention of Parliament other than for a negative purpose

Thanks (2)
Replying to Paul Crowley:
By Justin Bryant
12th Nov 2021 13:06

Where the meaning of the statutory words is plain and unambiguous it is not then for judges to invent fancied ambiguities as an excuse for failing to give effect to their plain meaning because they consider the consequences for doing so would be inexpedient, or even unjust or immoral. Duport Steels Ltd v Sirs [1980] 1 WLR 142 .

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Replying to Justin Bryant:
By Paul Crowley
12th Nov 2021 16:39

But HMRC could have used discretion

Thanks (0)
By VATs-enough
12th Nov 2021 22:14

"However, there are a small number of circumstances where an individual can reclaim VAT without a VAT number.
One such way, ............., is when a client builds a residence, usually to live in but occasionally to sell."

I thought the DIY VAT refund scheme was exclusively for non business purposes? If you are selling the house you must VAT regsiter and claim VAT as any other developer would?

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By matchmade
15th Nov 2021 17:07

What a nightmare for the Hacketts. If only they had retained at least a right-angle and part of one of the demolished walls to prop up one of the retained walls, they'd have been in the clear. They should have checked with a tax specialist and also gone back to Planning and issued a Variation request, and appealed it if they'd been refused. What is the point of retaining two unconnected principal walls when the other two had to be demolished?

The quick and dirty way round this would have been to use a private building inspector and send in the demolishers, who would quickly discover that the foundations are hopeless and the original walls simply will not stand up unaided, whatever the planning permission says. They'd then call out the inspector, who condemns the building as unsound, takes photos etc as proof, and the demolisher can finish razing the whole rotten edifice to the ground. A full VAT reclaim will now be possible and the local planning authority are presented with a fait accompli and won't have a leg/brick to stand on.

Planners should not be using planning permission like this to make citizens hang on to random walls just because a planning officer feels like it, irrespective of cost, practicality or that the final building could so easily be a pig in a poke with two old walls attached to the rest built in quality modern building materials. Of course conservation areas are different.

All this and associated VAT nightmares is going to be repeated up and down the country in hundreds of thousands of homes over the next 20 years, as owner-occupiers are forced to add external insulation to their properties to achieve net zero carbon. Pre First World War houses weren't designed or built to modern foundation depths or have impermeable exterior insulation layers added to them, never mind the incredible loss of detailing and quality in our built environment that is going to occur as lovely old Victorian brickwork is covered up with horrible boring white render facades.

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