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A change to the treatment of claims received by HMRC under the provisions of the DIY house builders and converters VAT refund scheme in respect of holiday homes is explained in Revenue & Customs Brief 29/10.
Following the First-tier Tribunal’s decision in Irene Susan Jennings (TC362), HMRC accept that the scheme applies to the construction of new holiday homes and to the conversion of non-residential buildings into holiday homes.
Up to now, HMRC have not applied the DIY house builders scheme to holiday homes since their supply by a developer attracts VAT at the standard rate.
However, the tribunal in the Jennings decision found that the existing legislation allows the same recovery of VAT on building materials for holiday homes that have been constructed by the individual for a non-business purpose.
As a result, claims for VAT incurred on building materials can be made for holiday homes that meet the necessary criteria.
HMRC say they will also allow claims for building materials, etc. where the work has involved the conversion of a previously non-residential building into a home.
Taxpayers may now submit claims subject to the usual conditions. Claims made in the past in relation to a holiday home which were refused in full or in part may be resubmitted.
All claims should be accompanied by planning permission, certificate of completion, building plans, all original VAT invoices, bills and credit notes.
