Conditions for a VAT DIY refund claim

In August 2016 the taxpayer submitted a planning application to the local authorities in Northern Ireland for the construction of a ‘single storey rear extension’ to a residential property. The extension consisted of a bathroom kitchen and sleeping accommodation and was built in the back garden of the existing property. Ultimately the extension became a standalone bungalow and the intention was for the taxpayer and his wife to live in the new building while his daughter and her family moved into the original house.

The taxpayer submitted a VAT431NM form to HMRC to claim building costs under the DIY refund scheme. HMRC refused the claim.

VAT incurred on building costs can be claimed through the DIY refund scheme in accordance with VATA 1994 s 35. The project must relate to a new dwelling or a residential conversion such as a pub being converted into a...