VAT – DIY builders – Residential building – Appellant obtaining planning permission for building works to extend his home – Demolition and rebuilding proving necessary owing to inadequate strength of existing walls – Council subsequently granting new planning permission for retention of new building – Section 35 of Value Added Tax Act 1994 – Respondents refusing appellant’s application for refund of VAT on works pursuant to DIY builders scheme under section 35 – Whether planning permission for construction of new dwelling in force at date of works – Appeal allowed In 2005, the appellant obtained planning permission from the local council for building works to his home to add a single-storey rear extension, a basement level and a first floor to provide further accommodation plus non-habitable loft space. The appellant commenced the works in early 2005, undertaking the project management himself. When the roof of the existing building was removed, it became apparent that the original plan was not feasible because the existing walls were not sufficiently strong. The council’s building inspector confirmed that it would be necessary to demolish the existing structure and rebuild it in accordance with the approved plans. The appellant proceeded accordingly. In 2009, after the works were completed, the appellant applied for a refund of £15,549 in VAT incurred on the building works, pursuant to the VAT refund scheme for DIY builders under section 35 of the Value Added Tax Act 1994. The respondents rejected the claim on the ground that the 2005 planning permission was not for the construction of a new dwelling, as required by section 35 and the notes to Group 5 of Schedule 8 to the 1994 Act. In 2010, the appellant made a further application to the council in respect of his works, which resulted in the grant of planning permission for the retention of a new dwelling as built. He made a further VAT refund application in reliance on that permission. The respondents again refused a refund on the ground that the 2010 planning permission had not been in force when the works were undertaken. The appellant appealed. Following an initial hearing, the matter was adjourned for the appellant to obtain clarification from the council as to the effect of the 2010 permission. In the ensuing correspondence, the council referred to the provisions of section 73A of the Town and Country Planning Act 1990, permitting the grant of permission for development that had already been carried out, and indicated that the 2010 permission granted permission for what had already been built so as to supersede the 2005 permission. Held: The appeal was allowed. In order for the building works to qualify for a VAT refund, it was necessary for the relevant planning permission for a new dwelling to be in force at the date of the works. The 2005 permission did not assist the appellant since it was for the wrong work. The 2010 permission assisted the appellant only if it had retrospective effect to when the works were carried out. For that to be the case, the appellant needed to show that the council had exercised their powers, under section 73A of the 1990 Act, to backdate the permission: Watson v Commissioners of HM Revenue and Customs [2010] UKFTT 526 (TC) applied. Although the 2010 permission was not retrospective on the face of the document, the evidence showed that the council had issued that permission pursuant to their powers under section 73A. Moreover, the council had intended the 2010 permission to stand in the shoes of the 2005 permission, with the effect that it was intended to take effect from the same date as the 2005 permission. It followed that a planning permission covering the works had been in force at the time when those works were carried out. The conditions of section 35 were therefore met and the appellant was entitled to a refund of the VAT incurred on the relevant works. The appellant appeared in person; Hugh O’Leary, of HMRC appeals unit, appeared for the respondent. Sally Dobson, barrister
VAT – DIY builders – Residential building – Appellant obtaining planning permission for building works to extend his home – Demolition and rebuilding proving necessary owing to inadequate strength of existing walls – Council subsequently granting new planning permission for retention of new building – Section 35 of Value Added Tax Act 1994 – Respondents refusing appellant’s application for refund of VAT on works pursuant to DIY builders scheme under section 35 – Whether planning permission for construction of new dwelling in force at date of works – Appeal allowed
In 2005, the appellant obtained planning permission from the local council for building works to his home to add a single-storey rear extension, a basement level and a first floor to provide further accommodation plus non-habitable loft space. The appellant commenced the works in early 2005, undertaking the project management himself. When the roof of the existing building was removed, it became apparent that the original plan was not feasible because the existing walls were not sufficiently strong. The council’s building inspector confirmed that it would be necessary to demolish the existing structure and rebuild it in accordance with the approved plans. The appellant proceeded accordingly.
In 2009, after the works were completed, the appellant applied for a refund of £15,549 in VAT incurred on the building works, pursuant to the VAT refund scheme for DIY builders under section 35 of the Value Added Tax Act 1994. The respondents rejected the claim on the ground that the 2005 planning permission was not for the construction of a new dwelling, as required by section 35 and the notes to Group 5 of Schedule 8 to the 1994 Act.
In 2010, the appellant made a further application to the council in respect of his works, which resulted in the grant of planning permission for the retention of a new dwelling as built. He made a further VAT refund application in reliance on that permission. The respondents again refused a refund on the ground that the 2010 planning permission had not been in force when the works were undertaken.
The appellant appealed. Following an initial hearing, the matter was adjourned for the appellant to obtain clarification from the council as to the effect of the 2010 permission. In the ensuing correspondence, the council referred to the provisions of section 73A of the Town and Country Planning Act 1990, permitting the grant of permission for development that had already been carried out, and indicated that the 2010 permission granted permission for what had already been built so as to supersede the 2005 permission.
Held: The appeal was allowed.
In order for the building works to qualify for a VAT refund, it was necessary for the relevant planning permission for a new dwelling to be in force at the date of the works. The 2005 permission did not assist the appellant since it was for the wrong work. The 2010 permission assisted the appellant only if it had retrospective effect to when the works were carried out. For that to be the case, the appellant needed to show that the council had exercised their powers, under section 73A of the 1990 Act, to backdate the permission: Watson v Commissioners of HM Revenue and Customs [2010] UKFTT 526 (TC) applied. Although the 2010 permission was not retrospective on the face of the document, the evidence showed that the council had issued that permission pursuant to their powers under section 73A. Moreover, the council had intended the 2010 permission to stand in the shoes of the 2005 permission, with the effect that it was intended to take effect from the same date as the 2005 permission. It followed that a planning permission covering the works had been in force at the time when those works were carried out. The conditions of section 35 were therefore met and the appellant was entitled to a refund of the VAT incurred on the relevant works.
The appellant appeared in person; Hugh O’Leary, of HMRC appeals unit, appeared for the respondent.
Sally Dobson, barrister
