No refund despite incorrect HMRC advice

The taxpayer constructed a new static caravan and asked HMRC’s telephone helpline service if he could reclaim the VAT paid on the materials used in the construction by submitting a DIY refund claim.

The officer told him that the builder services would be zero rated and that the VAT on the materials could be claimed with a DIY claim.

The taxpayer proceeded on this basis but HMRC denied the claim for £16 000 because the building did not relate either to a newly constructed dwelling or a residential conversion of a non-residential building into a dwelling.

VAT on the costs of caravans cannot be claimed because caravans are not ‘within the DIY refund scheme’ (VATA 1994 s 35).

The taxpayer claimed that HMRC’s bad advice was a ‘breach of legitimate expectation’ and that HMRC had behaved in an ‘objectional way’...