A farm buildings VAT-recovery ruling in favour of a farmer against HMRC has been welcomed as an “encouraging outcome” by chartered accountants Saffery Champness.
“HMRC has a record in challenging DIY housebuilder claims with regard to conversion or new-build projects,” said the firm’s partner and VAT specialist Sean McGinness.
“It is important for the developer to carefully review and follow HMRC guidance to ensure that properly recoverable VAT does not become a cost
“As supported by the first tier tribunal (FTT), in this case the initial determination of HMRC may not ultimately be proven to reflect the correct approach.”
The case in question involved Roy Tabb, who owned a barn and several outbuildings, one of which had been converted into an annexe which was demolished.
A new house was built in its place and the adjoining barn was sold.
HMRC rejected Mr Tabb’s claim for a refund under the DIY Builder’s Scheme for the VAT incurred on constructing the new house, which Mr Tabb then appealed.
HMRC argued the building was not new because it had not been demolished to ground level and said the barn and annexe was one building.
Mr McGinness said: “Mr Tabb argued they were separate and, even if it was not considered new, the enlargement to the existing building should be considered to be a new dwelling, especially as there was no access to the new build from the barn conversion.
“The FTT agreed with the taxpayer that the alteration had created a new dwelling.”
He said ruling was encouraging for farmers undertaking the conversion of redundant farm buildings for residential use.