Bungalow bill

A builder client has been working on what was originally planned as a building extension. An existing bungalow was to have a garage added to it. The roof was also to be taken off and the bungalow was to be built upwards to become a house before the roof was put back on: clearly all VAT standard-rated work.

However when the roof was removed the structure of the building was found to be unsound so the decision was taken to demolish the property and rebuild it completely.

The local planning authority gave retrospective permission for the ‘erection of a replacement five-bed dwelling with associated external alterations’.

The owner of the property has been advised that he cannot claim back the VAT charged by labour-only subcontractors and so is insisting that my client issue credit notes to cancel the VAT previously charged even though those invoices were properly...