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So-called DIY builders who 'construct' their own homes can reclaim VAT incurred in doing so. As one case showed, however, there is a very great difference between the ordinary English usage of that word and its meaning in VAT legislation.
The case concerned a couple who bought a derelict farmhouse. It had holes in the roof, its front wall was bowed and water was running out of the door. They carried out extensive building works that left only the building's two gable ends standing but succeeded in transforming it into a comfortable home. Their request for DIY builders' relief was, however, rejected by HM Revenue and Customs.
Ruling on their challenge to that decision, the First-tier Tribunal (FTT) noted that, as a matter of ordinary English, the project clearly resulted in the 'construction' of a dwelling. The Value Added Tax Act 1994, however, specifically provides that conversion, reconstruction or alteration of an existing building do not amount to works of construction.
The Act also states that a building only ceases to be an existing building when it is demolished completely to the ground or where the part remaining above ground consists of no more than a single façade, the retention of which is a condition or requirement of the relevant planning permission.
The couple's case did not fall within either of those categories in that they did not demolish the entire building – they did not have planning permission to do so – and the gable ends could not be viewed as a single façade.
DIY builders' relief is also available where non-residential buildings are converted for residential use. However, the couple could not benefit from that provision in that the farmhouse was clearly designed as a dwelling and had been used as such fewer than 10 years prior to the commencement of the building works.
In rejecting the couple's appeal, the FTT acknowledged that there are some oddities in the conditions that must be satisfied in order to take advantage of the DIY builders' scheme, particularly when viewed in the context of the planning regime. However, it was not its task to reason why and there was no way the legislation could be interpreted in a way that permitted the couple's case to succeed.