VAT reclaim being queried

[Ksev]

Hi everyone,

 

I submitted my self build VAT reclaim pretty much as soon as my house was signed off by building control back in February of this year.

 

Today I've had a letter querying why it's taken us so long to claim the vat when we moved into the (unfinished) house in 2017 and the last receipt was dated 2020.

 

We pretty much bought the stuff we needed when we had funds then finished the house ourselves as and when we had time, while also working full time and having 4 children.

 

But how can I prove this? 

[Roundtuit]

I'd just politely respond and explain what you've just posted.  We moved in months before sign-off, and like you, got the house ready for sign-off as and when we could.  It can't be unusual.

[AliG]

I am in exactly the same boat, don't have a completion certificate yet, moved in in 2018.

[ToughButterCup]

6 hours ago, Ksev said:

...

Today I've had a letter querying why it's taken us so long to claim the vat when we moved into the (unfinished) house in 2017 and the last receipt was dated 2020.

...

 

They have to ask you that question.

Read the Guidance Notes at the end of the form: the bit about time scales. 'Normally' they expect an application with [n] months of [x/y/z] date of the date of the Document informing you that the property has been listed at the Valuation Office (National, not local).

You are applying well after that date.  Hence the question.

 

Quite how @AliG has got away with a 2018 move in and no letter from the Valuation Office .... I take my hat off to you sir  (hidden behind bales ? 😁)

Our friendly local Valuation Officer  zooms round on her broom so often we now wave to one another - loads'a house building round here. Ya wouldn'a got away with it here .....

 

I would expect you to be dealt with fairly @Ksev.  In respect of evidence, may I suggest a look at your photo records (for us Google Photos)  Put together an album with the dates of the various bits of the build - the Xif data on the images is your friend here : there : there will be all sorts of information - among them date of the photo - that you can submit. 

 

[AliG]

We have been on the valuation roll since we moved in, but we were nowhere near finished when we moved in.

 

Someone took them to court and won that the completion certificate is a valid date. I don't believe that they can argue about that anymore.

[Roundtuit]

33 minutes ago, ToughButterCup said:

Read the Guidance Notes at the end of the form: the bit about time scales. 'Normally' they expect an application with [n] months of [x/y/z] date of the date of the Document informing you that the property has been listed at the Valuation Office (National, not local).

I'm sure this has been covered elsewhere, but the government website doesn't mention listing at the Valuation Office, but does require a BC sign off as evidence of completion:

https://www.gov.uk/vat-building-new-home/how-to-claim

[ProDave]

8 hours ago, AliG said:

I am in exactly the same boat, don't have a completion certificate yet, moved in in 2018.

How do they KNOW you moved in in 2018?

 

[Temp]

It's crazy how hmrc complain when you let them keep your money interest free for a few years.

[jack]

13 hours ago, ToughButterCup said:

They have to ask you that question.

Read the Guidance Notes at the end of the form: the bit about time scales. 'Normally' they expect an application with [n] months of [x/y/z] date of the date of the Document informing you that the property has been listed at the Valuation Office (National, not local).

You are applying well after that date.  Hence the question.

 

Unless the notes have recently changed significantly, this isn't my recollection of what they say.

The notes say that something along the lines of the completion certificate being the usual document that will be relied upon, but that the applicant may choose to rely on another document such as a valuation listing confirmation or a letter from their bank confirming that a final stage payment has been made. The three months runs from the date of the chosen document.

 

Basing "completion" on the date of moving in or on which the property is added to the council tax valuation list is a complete distortion of the notes (note: not even the law) accompanying the form, but unfortunately this is what HMRC is doing. This has been repeatedly addressed by tribunals, the majority of which - particularly more recently - have ruled that the moving in or council tax listing date is not relevant to assessing whether the VAT has been reclaimed in a timely fashion.

 

I should add that HMRC often aren't only relying on the valuation date. They're identifying the worst date they can reasonably infer from the facts. So they start with the council tax valuation date, because that's something they can easily and objectively determine from public records. If you can prove significant expenditure on building works after that, then they will likely move the date forward accordingly. I think that's what happened to us - we moved in and paid council tax for several years before getting a completion certificate, but had a couple of significant spends shortly before completion that I suspect dragged us over the line.

 

This whole area is a disgusting mess. The only real way to guarantee that you get your money back is to finish the build promptly, see if you can get the council tax listing delayed until completion, not move in until you get your completion certificate, and then make the claim within 3 months of the completion date. Unfortunately, for a lot of self-builders this is a difficult if not impossible thing to achieve.

 

12 hours ago, AliG said:

Someone took them to court and won that the completion certificate is a valid date. I don't believe that they can argue about that anymore.

 

Unless I've missed a recent case (possible, as I haven't been following it since we got our refund), this has not been tested in court. All of the relevant cases have been at the tribunal level, which means that they don't have the force of precedent. That means that the next tribunal is free to - and sometimes does - make a completely different determination on similar facts. Unless and until someone appeals it to a higher court, this is how things will be.

 

In case anyone's interested, here are some notes I put together when I assumed we'd be arguing this in the tribunal. There may be more recent cases - if anyone knows, please tell me:

 

Tribunal case: [2020] UKFTT 00157 (TC) - John McGarry and Monica McGarry

 

Tribunal case: [2020] TC07553 - Simon & Joanne Cotton v HMRC

 

https://www.accountancydaily.co/diy-expert-builds-winning-case-vat-refund

HMRC vs Sansom – Timeline of events

The Sansom family moved into the relevant house in 2013 (before work was completed), the final expenditure was incurred in 2016, however for a variety of reasons the certificate of completion was not obtained until June 2018 and the DIY claim was then submitted less than three months later on 1 September 2018. HMRC contended that the claim was made late, arguing that the completion of the building should be assessed by reference to a ‘multi factorial test’ and not just the issue of a completion certificate.

https://www.casemine.com/judgement/uk/5e6881d62c94e041f1973047 - Proffit v Revenue & Customs - Latest case? Excellent outcome + refers to internal HMRC guidance about extensions.

 

https://www.constablevat.com/diy-housebuilder-scheme/ - Summary of cases, including case where HMRC won.

 

https://www.icas.com/landing/tax/the-most-expensive-tax-breaks - Another summary.

 

https://www.rossmartin.co.uk/vat/vat-cases/4907-is-a-diy-claim-completion-date-decided-by-reference-to-the-certificate-of-completion

 

https://www.taxationweb.co.uk/forum/vat-diy-rebate-rejected-t33423.html - Shows how the notes accompanying the reclaim form have changed over the years. Used to explicitly say that, in case of any doubt, applicant could safely rely on completion certificate + all building regs met.

 

11 hours ago, ProDave said:

How do they KNOW you moved in in 2018?

 

Because the form asks you what date you moved in on. You'd be game lying to HMRC in writing, given that they have the power to penalise you for making false statements. I saw one tribunal decision where someone had accidentally tried to reclaim VAT on a build where it wasn't appropriate (effectively, they weren't self-builders). It was a simple error on the claimant's part. They answered all the questions perfectly accurately, which was what allowed HMRC to correctly determine that they weren't eligible for a refund. For some reason, instead of just denying the claim, HMRC levied a significant penalty for attempting to falsely reclaim tax. The tribunal was damning in its decision for the applicant, but I'd still rather not have to fight HMRC.

 

Plus as mentioned above, they can generally just look at the valuation date and infer that the house was complete then, without needing to refer to the moving in date.

 

That said, I expect that if you give them a moving in date that's a lot earlier than the valuation date, they'll try to rely on the former to your detriment. 

[ToughButterCup]

On 31/08/2022 at 09:31, jack said:

...
The notes say that something along the lines of the completion certificate being the usual document that will be relied upon, but that the applicant may choose to rely on another document such as a valuation listing confirmation or a letter from their bank confirming that a final stage payment has been made. The three months runs from the date of the chosen document.

...

 

Correct, @jack

But the LPA Valuation Officer may also initiate that process by visiting the site and declaring that (you) are substantially inhabiting the site, and therefore that Officer  can choose to initiate the process of declaring your property as ready for inclusion on the Valuation List.

 

So to refine your sentence above a little  

 

... but that both the applicant or the Local Valuation Officer  may choose (to initiate the process) ....

meaning the Habitation Letter  from the Local Authority as below

 

(Abstracted from VAT FORM 431NB page 7 )

 

The line that the LPA Valuation Officer took (with us)  was that her judgment on the matter was the key issue : were we 'substantially' living in our new house - or not?  In our case she initiated the process.

 

And what does 'substantially' mean? 

Her answer - water supply, electricity supply, kitchen in, sleeping overnight. 

 

 The (HMRC VAT Form 431NB ) notes above merely hint that the LPA may choose tell the Valuation Office.  The initiation of that process is hidden.

 

Thats the danger for self-builders. Hence the importance of continuing to  secure your site until well after completion : thieves, or inquisitive children  aren't so much the problem - its snooping Valuation Officers wandering around on-site without permission that could well hit you right in the bank balance.  

 

Like most of us, I'd become fed-up of the build looking like a building site after a few years - so I took the HERAS down: there are no dangerous areas of the site anymore. Our build is right next to a minor road. Easy off-road parking deliberately provided for visitors' safety.

 

Arguably another self-build rooky error.

 

I would recommend everyone to examine the reading list given by @jack above as a bit of quiet fire-side reading this autumn.

 

Think hard before removing the HERAS from your site.

[jack]

42 minutes ago, ToughButterCup said:

 

Correct, @jack

But the LPA Valuation Officer may also initiate that process by visiting the site and declaring that (you) are substantially inhabiting the site, and therefore that Officer  can choose to initiate the process of declaring your property as ready for inclusion on the Valuation List.

 

So to refine your sentence above a little  

 

... but that both the applicant or the Local Valuation Officer  may choose (to initiate the process) ....

meaning the Habitation Letter  from the Local Authority as below

 

(Abstracted from VAT FORM 431NB page 7 )

 

The line that the LPA Valuation Officer took (with us)  was that her judgment on the matter was the key issue : were we 'substantially' living in our new house - or not?  In our case she initiated the process.

 

And what does 'substantially' mean? 

Her answer - water supply, electricity supply, kitchen in, sleeping overnight. 

 

 The (HMRC VAT Form 431NB ) notes above merely hint that the LPA may choose tell the Valuation Office.  The initiation of that process is hidden.

 

Not sure I agree with this characterisation of the situation.

 

At best, HMRC's current practice (which is repeatedly rejected in several of the tribunal cases above) is to use entry onto the valuation list as prima facie evidence of completion. However, the notes themselves do not even hint that mere entry is enough. They say:

 

 

"we'll accept one of the following documents" does not mean "we'll go and look up a database after you rely on the completion certificate". In plain English, it means if the applicant chooses to rely on a different document, the applicant can supply a copy of that document, and the three months runs from then.

 

I take your general point though, and it's not a bad worst-case position to start from. If HMRC is willing to use the VOA date in this way (i.e., without you electing to rely upon it), then there is a real risk the valuation officer is in practice the one controlling the date HMRC will start with when deciding whether you've applied in time.

 

It may be that you'll win on appeal, but there are no guarantees, and even if you win, appeals are highly stressful and time-consuming.

 

 

[Ksev]

Thanks everyone,

Our carpenter wrote a letter confirming he had worked on the house until the date of completion.

We've had a letter from HMRC today explaining they now have all the info they need and they will now process our claim within the 6 week timescale, once processed it will take 20 days to pay us. Does this mean we are now back down to the bottom of the pile and it's going to take another 10 months to get paid 😭

It's really annoying how they only gave us a few weeks to reply to their correspondence or our claim would be cancelled but they can work with indefinite timescales.