VAT: DIY Garage part of single continuous building project

In the case of many DIY house building projects, work is not undertaken all day or every day. Work may take place in bursts, with gaps in between. There is no limit to the amount of time that a DIY project can take. However it is not in anyone’s interest to artificially extend the time taken to complete a DIY project. The full nominal amount of the VAT paid can only be claimed at the end of the project, by which time it will be significantly less in real terms than it was at the time the self builder originally paid the invoices.

In the First-tier Tribunal (Tax) case of Bowley v Revenue & Customs [2015] the appellant had built a house, and an associated garage block and other works. The appellant claimed a refund of VAT outlaid on the construction costs under the DIY House Builders Scheme, operated under section 35 of the Value Added Tax Act 1994 (“VATA”). HMRC refused the claim because the claim had not been made within 3 months after construction of the building was complete, as required by s 35(2)(a) VATA and regulation 201 of the VAT Regulations 1995. Site excavation for the separate garage block commenced in April 1993. The dwelling had been completed on 22 June 1994, so the claim should have been submitted by 22 September 1994. A delay in the construction of the garage block was not an acceptable reason for the delay as a garage block could only be included as part of a claim if it was constructed at the same time as the dwelling. In fact the reinforced floor slab for the garage block was not laid until 30 September 1994.

The appellant countered that the dwelling and the garage block were a single project. The claim had been made within 3 months of completion of the garage block and retaining walls to the property, which had completed the whole project.

The Tribunal said it was not fatal to the appellant that the garage was the subject of a separate planning consent. Planning permission for the garage had been applied for almost a year and a half before the house was completed, and had been granted more than 12 months before the house was completed. The plan had originally been for the house to have an attached garage. The decision to have the garage separate from the house instead was a change in plans during the course of construction. It did not mean that the detached garage was necessarily a new project, as opposed to just a change in the original project.

The Tribunal said a dwelling and a garage will be “constructed … at the same time” under Note (3) to Group 5 of Schedule 8 VATA, if they are both built as part of a single continuous building project. If there is a single continuous building project, it should not make any difference in what order work is undertaken on different components of the project. Work on some components may be started or finished in advance of others. It should not matter if one component is built first and then the next component built immediately thereafter, or if there are significant gaps between bursts of activity, provided that the project can overall still be characterised as a single continuous building project.

The appellant conceived the house and the garage as a single project. So the question was whether there was a gap in time between completion of the house and the construction of the garage such that in practice they were not built as a single continuous building project?

Preliminary groundwork for the garage had already been undertaken before the house was completed. The rest of the work on the garage followed on immediately after completion of the work on the house. Both house and garage were constructed as a single continuous building project.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.