Section 35 of the Value Added Tax Act 1994 (“VATA”) says a person constructing a building designed as a dwelling can claim a refund of VAT from HMRC provided that the work undertaken is “lawful and otherwise than in the course or furtherance of any business”. To be “lawful” the work must have been carried out in accordance with “statutory planning consent” that has been granted in respect of that dwelling (note (2)(d) Group 5 schedule 8 VATA).
The refund claim must conform to regulation 201 of the Value Added Tax Regulations 1995 (“VAT Regulations”) which, insofar as relevant to the case that follows, provides:
“A claimant shall make his claim in respect of a relevant building by—
(a) furnishing to the Commissioners no later than 3 months after the completion of the building [the relevant form for the purposes of the claim] containing the full particulars required therein, and
(b) at the same time furnishing to them—
(iv) documentary evidence that planning permission for the building had been granted”.
In the First-tier Tribunal (Tax) case of Reynolds v Revenue and Customs  a proposed dwelling with only planning permission for an extension and extra storey was in fact required by the building inspectors to be demolished and restarted from scratch because the foundations would not be adequate.
The tribunal said the legislation had to be construed strictly and:
– the demolition and rebuilding of the property was not in accordance with the planning permission then in force and
– the retrospective planning permission for the more extensive works which actually occurred, was not provided to HMRC within three months of completion of the property as specified by regulation 201 of the VAT Regulations.
“…..the legislative requirements for claiming a VAT refund are strict and HMRC are allowed no discretion to accept something less than the prescribed documentation, neither can they extend the time limit. Equally it is not open to us to waive or modify these requirements, even if they lead to what appears to be an unfair result. As a Tribunal created by statute the FTT, unlike the High Court does not have an inherent jurisdiction, rather its jurisdiction is defined and limited by legislation and it does not extend to the power to override a statute (or supervise the conduct of HMRC).”
This blog has been posted out of general interest and does not replace the need to get bespoke legal advice in individual cases.