The couple demolished a wooden bungalow on their land and embarked on an epic project to construct a new home for themselves. They lived in a caravan whilst the work was ongoing. Although the man, a jobbing builder, had for five years devoted his weekends and holidays to working on the project, it remained incomplete.
They availed themselves of the DIY Builder Scheme, which enables those who build their own homes to reclaim VAT on construction materials, and HM Revenue and Customs (HMRC) duly repaid them £5,182. However, when they made a further claim under the scheme, it was roundly rejected.
HMRC asserted that, on a true interpretation of Section 35 of the Value Added Tax Act 1994, DIY builders can only make a single claim for repayment of VAT in respect of any one building. They contended that such claims can only be made in a three-month window following a building’s completion. According to HMRC, the earlier VAT repayment should not have been made as the couple’s home was incomplete.
In challenging HMRC’s stance, the couple pointed out that self-build projects often take years. Most self-builders only ever build one house and would be discouraged from doing so if they were barred from making periodical reclaims of VAT whilst works are in progress. It cannot have been Parliament’s intention to expose self-builders to the hardship of only being able to make one repayment claim, post completion.