Cabin construction

Refund for VAT DIY housebuilders’ scheme

The taxpayer applied for planning permission to build a log cabin as holiday accommodation in the back garden of his home. Permission was granted on condition that it was used for tourism purposes only and not as a main residence although this was removed in a later application. Before starting to build the cabin the taxpayer sold his home and after the cabin was finished he occupied it as his main residence.

He claimed a VAT refund under the DIY builders’ scheme (VATA 1994 s 35). HMRC refused on the ground the cabin was occupied as a permanent home contrary to planning permission and was therefore unlawful. Further had the cabin been used for holiday lets it would have been in the furtherance of a business and therefore not within the conditions for the DIY scheme.