The plans for the new home which you were going to build yourself were passed; the build went ahead with no problems, even the weather was on your side; you were correctly charged VAT at the standard rate on the building materials which you bought from your local building merchant; you completed the forms required by HM Revenue & Customs to reclaim the VAT on your building materials and submitted them together with the other required paperwork; all that remains is for the repayment of the VAT to hit your bank account.
But what’s this? The postman has just returned to you all your paperwork, with the addition of a letter from HM Revenue & Customs advising you that you are not entitled to reclaim the VAT on your lovely new home. This a major blow to you as the funding of the project was calculated on the basis that the VAT would be repaid to you.
So what has gone wrong? The letter from HM Revenue & Customs appears to be saying that what you have built is not a dwelling house when quite clearly it is- or is it?
The definition of a ‘dwelling house’, as qualified by the notes to Group 5 of Schedule 8, VAT Act 1994 states that ‘a building is designed as a dwelling or a number of dwellings where in relation to each dwelling the following conditions are satisfied:
- The dwelling consists of self-contained living accommodation;
- There is no provision for direct internal access from the dwelling to any other dwelling or part of a dwelling;
- The separate use, or disposal of the dwelling is not prohibited by the term of any covenant, statutory planning consent or similar provision; and
- Statutory planning consent has been granted in respect of that dwelling and its construction or conversion has been carried out in accordance with that consent.
The letter from HM Revenue & Customs refers you to your planning consent which states that your new house cannot be disposed of separately from the other pre-existing buildings on the site, the results being that your home does not meet the requirements to be considered as a dwelling and you therefore are not entitled to your VAT reclaim.
The moral of this story is ‘always check your planning conditions for any restrictions’.
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