Logical absurdity

Two taxpayers owned a property that they planned to convert into flats which they would then sell. They contacted the HMRC helpline stating they wished to apply for the DIY housebuilders’ VAT scheme.

The taxpayers completed the relevant form based on information received from the helpline rather than the notes accompanying the submission document.

The Revenue said the taxpayers were not eligible to use the scheme because of their intention to sell the flats. The department imposed a penalty under FA 2007 sch 24 para 1(1).

The taxpayers appealed. They agreed they were wrong to have applied for the DIY scheme but said there was no loss of revenue because they had registered for VAT which allowed them to correctly recover input tax in excess of that claimed under the scheme.

The First-tier Tribunal noted that para 1(1)(c) stated a fine was payable if...