Update for homeowners claiming VAT refunds
Here are some tips for homeowners wanting to claim refunds of VAT from HM Revenue and Customs. (The tips refer to recent tribunal decisions).
Top tip – building work can be subject to the zero rate of VAT, the reduced rate of VAT, or the standard rate of VAT, with the correct rate depending on detailed rules. Information regarding the detailed rules is in VAT Notice 708 on the www.gov.uk website.
If VAT is incorrectly charged, it is may be possible to obtain reimbursement from the builder, but it is better to only pay the correct amount in the first place. HMRC will normally refuse to refund VAT that has been incorrectly charged.
The form to use for new homes is called VAT431NB. It allows people to claim a refund of VAT on building materials they paid for to build a new dwelling for themselves or their family.
The zero rate of VAT applies to building services when constructing new dwellings.
The form to use for conversion projects is called VAT431C. Like the form mentioned above, it allows people to claim a refund of VAT on building materials they paid for to convert a building, for example a barn, to a dwelling for themselves or their family.
The VAT431C form also allows people to claim a refund of the reduced rate of VAT on conversion work. Both forms and the rules that apply to each are available on the www.gov.uk website.
One form should be used for each project and the form should be submitted to HMRC within three months of the completion of the project, although HMRC can accept a late claim if there is a reasonable excuse.
If HMRC decide to refuse to accept a claim, either in whole or in part, it is possible to appeal to the Tribunal.
In a recent example of The Tribunal allowing an appeal, the certificate of completion was granted on 19 June 2018 and within three months, on 1 September 2018, the VAT refund claim was submitted. HMRC refused to refund the VAT because, according to the argument HMRC presented to the Tribunal, the date of completion of a building is not decided by reference to the certificate of completion, but by applying a multifactorial test.
The operation of the multifactorial approach resulted in HMRC suggesting three alternative earlier completion dates, July 2013, or June 2016 or October 2016. The Tribunal did not agree with the argument HMRC presented and allowed the appeal.
Top tip – Avoid submitting the VAT refund claim too soon. Submitting it too soon, before all the relevant costs have been incurred, reduces the claim.
In another recent example of The Tribunal allowing an appeal, the certificate of completion was granted on 4 January 2019 and on the same date the claimant submitted his claim for a VAT refund.
According to HMRC, the claimant could have submitted the claim when he first occupied the house in 2010.
The original plan was to build a house and garage as one project. It was only in late 2018 when the claimant decided that he would not build the garage.
Top tip – The construction of a house and garage can qualify as one project, even if the two buildings are separate.
Top tip – If there is a delay between completing the building and submitting the VAT refund claim, then you must provide HMRC with a written explanation of why the claim is submitted late. ■ www.garbutt-elliott.co.uk.