Value added tax – DIY Builders’ Scheme – Construction of dwelling – Appellant owner of fishery business building bungalow for own occupation – Planning consent being subject to condition restricting persons entitled to occupy bungalow – Appellant appealing against refusal of claim for VAT refund under DIY Builders Refund Scheme – Whether property being designed as a dwelling for purposes of subsection 35(1A)(a) and Note (2)(c) to Group 5 of Schedule 8 to Value Added Tax Act 1994 – Whether conditions of development prohibiting “separate use” of dwelling for purposes of Note (2)(c) – Appeal dismissed
The appellant carried on a fishery business at Horseshoe Fish Pond, Balne Moor Road, Balne, Goole, North Yorkshire. He appealed against the decision of the respondent commissioners to refuse his claim for a VAT refund of £5,305.63 under the DIY Builders Refund Scheme, made in accordance with section 35 of the Value Added Tax Act 1994. The claim was in respect of VAT incurred on the erection of a detached bungalow on the site for his own occupation. The respondents refused the claim on the basis that the erection of the bungalow did not satisfy the legislative criteria to be considered as a “building designed as a dwelling” in accordance with section 35 and Group 5 of Schedule 8 to the Act because the planning permission granted by the local authority contained a restriction on the use of the property, contrary to Note 2(c) of Group 5.
The appellant contended that the bungalow met all the criteria as defined in section 35 of the 1994 Act, covering designed as a dwelling. The appellant was effectively arguing that because the mobile home, which had been used in connection with the fishery business was now a permanent dwelling which provided accommodation for his son as owner of the business, there was no need for the conditions attached to the planning consent in respect of the new bungalow. Accordingly, the conditions which he regarded as redundant, should not prevent him reclaiming VAT on construction of the bungalow.
Furthermore, had he received the certificate of lawful use for the extended mobile home before he received planning permission for the new bungalow, the certificate of lawful use in respect of the mobile home would have been subjected to appropriate planning conditions restricting its use and occupation obviating the need for the restrictions on the bungalow. The planning restrictions should therefore should not disqualify his VAT reclaim.
Held: The appeal was dismissed.
The separate use or disposal of the dwelling was prohibited by the terms of the planning consent. As a restriction existed within the planning permission, by reference to Note 2(c) of Group 5 of Schedule 8 to the 1994 Act, the bungalow did not fall to be considered as “a dwelling” within the DIY Builders Refund Scheme. Further, the restriction within the planning permission also created a link between the bungalow and the business. As such, the claim failed to meet the requirements of section 35(1)(b) of the Act, that the “carrying out of the works is lawful and otherwise than in the course or furtherance of any business, and….”. The conditions attached to the planning consent for the bungalow were clear and unequivocal. Although not a matter for the Tribunal, had the certificate of lawful use for the extended mobile home/static caravan been given prior to the application for planning permission for the bungalow, it seemed unlikely that planning permission would have been granted for the bungalow in any event. In all the circumstances, the building was not “designed as a dwelling” for the purposes of section 35(1A)(a) and Note 2(c). Therefore its construction could not attract a refund of VAT pursuant to the Act: Commissioners of HM Revenue & Customs v Burton [2016] UKUT 0020 (TCC); [2016] PLSCS 22 considered.
The appellant appeared in person; Barry Sellars (officer of HM Revenue and Customs) appeared for respondents.
Eileen O’Grady, barrister
Click here to read a transcript of Heckingbottom v Commissioners for HM Revenue and Customs
