If you build your own home from scratch, you can make a claim to recover VAT on the cost of building materials you buy for the purpose (you don’t need to recover VAT on services, because they will almost always have been zero-rated).
One of the conditions is that one and only one claim can be made in respect of each dwelling; and it must by law be made ‘no later than 3 months after the completion of the building.’ That invites the question of what is meant by ‘completion’: the regulations give a clue by providing that the claim must be accompanied by ‘a certificate of completion obtained from a local authority or such other documentary evidence of completion of the building as is satisfactory to the Commissioners.’
The question has been before the First-tier Tribunal (‘FTT’) on a number of occasions. The most recent was in Fuller v HMRC [2020] UKFTT 173 (TC).
Mr Fuller started building his house in 2005. Initially he had been refused consent for the triple garage that he wanted; but on appeal the consent was extended. The building of the house progressed reasonably quickly, and Mr Fuller occupied it from 2010. The garage proved more problematic. It turned out that ground conditions meant that it would cost £60,000 to build: by comparison, building the house had cost £100,000.
Mr Fuller didn’t submit his claim in 2010, as he considered that the project was not ‘completed’ all the time the garage (which was part of the single planning consent) remained unbuilt. Eventually, in 2018 he admitted defeat and decided that he was never going to have the funds to construct the garage. So, he wrote to the local council applying for a certificate of completion (accepting that if his position changed and he wanted to build the garage in the future he would need to make a fresh planning application). The certificate was issued on 4 January 2019 and Mr Fuller submitted his VAT claim on the same day.
HMRC asserted that the claim was too late. The refusal was upheld on internal review.
Although HMRC do not seem to have pointed to any specific date as the ‘completion date’, the implication is that it was at or about the time that Mr Fuller occupied the house in 2010. That was not the only unsatisfactory aspect of HMRC’s case.
For one thing, inexplicably and inexcusably, their initial Statement of Case referred to a different property and different dates (and presumably a different taxpayer). They were given additional time to submit a proper Statement of Case, but as Mr Fuller’s representative observed, it did raise concerns that HMRC might not have “fully reviewed and considered the facts in [Mr Fuller’s] case.”
For another, the (corrected) Statement of Case cited (in quotation marks) a requirement that “a building is normally considered to be completed when it has been finished according to its original plans. Therefore, a claim can be made no later than three months after the construction work is completed. The three months will usually run from the date of the document used as completion evidence.”
The FTT commented that “The Statement of Case does not specify where this quotation is to be found”. We can tell them: it’s from HMRC’s own guidance notes for completing the claim form. This is not the first time that we have seen HMRC quoting their own guidance as if it were the law, and it is to be deprecated. Furthermore, trotting out that requirement was hardly relevant in a case such as Mr Fuller’s where the difficulty was that the building project as a whole had not been (and never would be) “finished according to its original plans”; and the assertion that the three months would usually run from “the date of the document used as completion evidence” surely supported rather than undermined Mr Fuller’s case.
That is not to say that HMRC failed altogether to cite legislation defining ‘completion’. They did: “A building shall be taken to be completed when an architect issues a certificate of practical completion in relation to it or it is first fully occupied, whichever happens first”. Unfortunately, that definition is from a different part of the VAT legislation altogether (Note (2) to Schedule 9 to VATA 1984) and has no possible relevance to the claim that Mr Fuller was making.
Nor was HMRC’s case helped by an earlier decision (in Bowley v HMRC [2015] UKFTT 683 (TC)) where the FTT had allowed a claim in which a garage and retaining walls had been completed 20 years after the house was built, on the grounds that “both the house and garage were constructed as a single continuous building project”: a case that HMRC tried valiantly but unsuccessfully to distinguish from Mr Fuller’s.
Mr Fuller, of course, won his appeal. And quite right too.
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This article was republished in TAXline (July 2020) and is available on the ICAEW website to ICAEW members.