HM Revenue and Customs Brief 29/10
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Issued 15 June 2010
VAT: DIY Housebuilders and Converters VAT Refund Scheme – treatment of
holiday homes
This Brief announces a change to the treatment of claims received by us under
the provisions of the above Scheme in respect of holiday homes.
The effect of the change
Following a decision of the VAT Tribunal, we now accept that the DIY
Housebuilders and Converters scheme applies to the construction of new holiday
homes and to the conversion of non-residential buildings into holiday homes. Any
refund of VAT is subject to the conditions of the Scheme being met.
Guidance for the scheme is attached to application forms as follows:
- VAT 431NB: VAT refunds for DIY housebuilders (new houses)
- VAT431C: VAT refunds for DIY housebuilders (conversions)
Both of these forms (including guidance) are available from the Forms section
of our Library.
Background
Individuals who purchase the freehold or long leasehold (over 21 years or 20
years in Scotland) of new dwellings (either newly constructed or converted from
non-residential buildings) receive those supplies zero-rated for VAT purposes.
On the other hand, individuals who construct or convert non-residential
buildings into dwellings for their own occupation, incur VAT on the purchase of
building materials and, where conversions are concerned, on the purchase of any
conversion services.
Where the dwellings are for their own (or a friend or relative’s) occupation
and are not constructed in the course or furtherance of a business, the
individuals cannot register in order to recover the VAT and so, to this extent,
are disadvantaged when compared to developers.
To address this issue, the DIY Housebuilders and Converters scheme, which was
first introduced in 1974, refunds VAT incurred on the cost of building materials
and (where appropriate) on conversion services for private individuals.
We have never applied the DIY Housebuilders Scheme to holiday homes since
their supply by a developer attracts VAT at the standard rate. However, a recent
decision of the VAT Tribunal (Mrs Irene Susan Jennings – TC00362) has found that
the existing legislation does allow the same recovery of VAT on building
materials for holiday homes that have been constructed by the individual for a
non-business purpose.
As a consequence of this decision, we now accept that claims, for VAT
incurred on building materials, may also be made for holiday homes that meet the
necessary criteria.
We will also allow claims for a VAT refund on building materials and, where
appropriate, services of conversion, where the work has involved the conversion
of a previously non-residential building into a home.
How to claim
If you have not submitted a claim before in respect of your holiday home,
then you may do so now providing the certificate of completion was issued within
the last four years and three months from the date of this Brief. If your
certificate of completion is older than this then we regret that your claim is
out of time.
If you have, at any time, submitted a claim in relation to a holiday home
which was refused in full or in part, for that reason, then you may now resubmit
that claim if you wish.
If you are making a claim, please ensure you use the correct form as
identified above.
The guidance to the forms is in the process of being amended to reflect this
change in policy but the forms themselves will not require alteration.
Exceptionally, where you have submitted a claim in the past, we will accept
the original claim form. All claim forms should be accompanied by:
- planning permission
- certificate of completion
- building plans
- all original VAT invoices, bills and credit notes
Please note that a claim cannot be considered unless the above evidence is
provided.
Resubmitted claims should be sent, along with a covering note quoting this
Brief, to:
HMRC DIY Claims Unit
Two Broadway
Broad Street
Five Ways
Birmingham
B15 1BG
Further information may be obtained from our Helpline on Tel 0845 010 9000.
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