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Refund level

17 January 2017
Issue: 4583 / Categories: Tax cases

CD Smith (TC5510)

VAT claimed under the DIY scheme

In 2005 the taxpayer began work converting a barn that adjoined his property. In September 2006 the planning authorities confirmed the converted property would be a new dwelling rather than an extension to his site.

The project was completed in 2015 and the taxpayer submitted a claim under the DIY housebuilders’ scheme (VATA 1994 s 35) to HMRC to reclaim VAT on all of the costs. The claim was for £32 185 but HMRC refunded only £7 756.

The main reason for this was because the builders charged 17.5% VAT on their services instead of 5% and HMRC refunded only 5% VAT. Because the period between the builders raising the invoices and the reduced claim was longer than four years (VATA 1994 s 80(A)) the builders could not raise a credit note to refund the 12.5% overcharged.

The work had also included...

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