In Philip Spani v HMRC [2023] TC08916, the First Tier Tribunal (FTT) found that a newly constructed cottage did not qualify for VAT recovery under the DIY Housebuilders scheme. Constraints imposed by the property’s planning permission meant it was built in furtherance of a business.

  • Mr Spani constructed a new cottage in Seaford and, in January 2021, sought repayment of £13,048 in VAT under the DIY Housebuilders scheme.
  • HMRC requested various items of information during the following months. This established that the cottage was:
    • Granted planning permission to be built as a holiday let. Under the terms of the planning permission, it could only be used for holiday accommodation and for no other purpose.
    • Required to be available for letting on a commercial basis for not less than 140 days a year.
    • Advertised with Airbnb, although letting had been frustrated by COVID and the health of Mr Spani’s partner. This meant that only Mr Spani and his partner had occupied the cottage.
    • Unlikely to have normally been granted planning permission had it not been a holiday let, due to the national park landscape in which it was situated.
  • In August 2021, HMRC refused the DIY Housebuilders scheme claim on the basis that the property was not eligible as it was let out or used for other business purposes.
  • Mr Spani Appealed to the First Tier Tribunal (FTT).

Section 35 VATA 1994 sets out a number of eligibility conditions for the DIY Housebuilders scheme. These include that the works must be lawful and carried out otherwise than in the course or furtherance of any business.

The FTT found that Mr Spani's cottage was built in furtherance of a business:

  • The planning consent explicitly stipulated that the cottage “shall only be used for holiday accommodation” and “for no other purpose”. The FTT found that it was bound by this.
  • Use of the cottage as a ‘dwellinghouse’ by ‘a single person or by people to be regarded as forming a single household’ was prohibited by the planning consent.
  • The building was specifically proposed as a holiday let in the planning application.
  • Mr Spani’s correspondence with HMRC stated in no uncertain terms his intention to carry on a Furnished Holiday Letting (FHL) business. He had advertised the property on Airbnb.
  • The home and contents insurance cover for the cottage specified that tenant’s liability insurance was part of the cover.
  • Although COVID and his partner’s ill health hindered Mr Spani’s intention to let the property, these subsequent events did not detract from the planning consent which indicated the property was constructed in furtherance of an FHL business.

The appeal was dismissed.


The FTT considered the distinction between a person building a holiday home as a second home (which would usually qualify under the DIY Housebuilders scheme), and a building designated to be a holiday let.

In the example of a holiday home, the works in its construction would not be ‘in the course or furtherance of a business’.

In this case, despite Mr Spani using the cottage as a second home, it was built first and foremost to be a holiday let. It was therefore built in furtherance of a business.

Useful guides on this topic

Land & Property: DIY Housebuilders scheme
It is possible to recover VAT on constructing a new residential dwelling, or dwellings, even where there is no planned sale of the property. This recovery can arise under the special refund scheme for DIY housebuilders.

Land & Property: Dwellings
What is a dwelling for VAT purposes? What is the VAT treatment for construction, conversion, sale, and letting of a dwelling?

Furnished Holiday Letting
What is Furnished Holiday Letting? How do you qualify for Furnished Holiday Letting? What are the rules for Furnished Holiday Letting?

Statutory Review (by HMRC)
What is a Statutory Review? When does HMRC offer a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? When does HMRC offer a Statutory Review?

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External link

Philip Spani v HMRC [2023] TC08916

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