Two recent cases demonstrate the importance of the timing of removing planning permission conditions when establishing what is a dwelling for VAT.

  • To be eligible to reclaim VAT under the DIY housebuilder scheme the property has to qualify as a ‘dwelling’ in accordance with VAT law.
  • The same definition of dwelling has to be met in order for a new build to qualify for zero rating.
  • One of the key conditions is that there must be no planning condition prohibiting separate use or disposal of the property.

In Jason Campbell v HMRC [2017] UKFTT 104 the planning permission included a condition that only a person employed by the livery business located within the lands could occupy the property.

  • The DIY VAT refund was denied on the basis that the property was prohibited from being used outside of the livery business and was therefore not a dwelling.
  • The First-Tier Tribunal (FTT) agreed and even though the condition was removed in the lead up to the hearing, the FTT confirmed that as it was in place at the time of the claim it cannot have an effect on the decision.

By contrast, in Quitie Limited v HMRC [2017] UKFTT 0206 the planning permission condition, prohibiting a disposal if the adjacent Hotel buildings were not included in the sale, was removed before completion.

  • The FTT agreed with the taxpayer that the only time that one could consider whether a property was a dwelling, was at completion and, at completion, there was no prohibition: the services provided prior to the removal of the condition could therefore be zero rated.


Our guides:

VAT: Land & Property (notes)

VAT: Land & Property at a glance

Case references:

Jason Campbell v HMRC [2017] UKFTT 104

Quitie Limited v HMRC [2017] UKFTT 0206

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