In Brian David Webb v HMRC [2025] TC09611, the First Tier Tribunal (FTT) found that a former builder was not carrying on an economic activity for VAT purposes and was therefore unable to recover VAT attributable to his properties.
Mr Webb was registered as a builder for VAT from 16 October 1979, but stopped providing building services to third parties in 1995. He continued to submit VAT returns, but no Self Assessment returns were submitted after 2008-09.
- On 15 April 2021, HMRC wrote to Mr Webb intimating that a compliance check of his VAT return for the period 02/21 would be carried out before the VAT repayment he had claimed, of £1,828, was authorised.
- In that return, VAT recovery was sought on various invoices dated between 2 September 2000 and 24 March 2021 relating to three properties that Mr Webb had owned: ‘Weyside’, ‘Windfield’ and ‘Dolphin’.
- Weyside had been rented out between 2001 and 2009. It was not inhabited after 2009 and was sold in March 2020.
- Windfield was sold in September 2018. The dwelling on the site had been demolished as of March 2013, and no building work subsequently took place before the site was sold.
- Dolphin was uninhabitable. Mr Webb had carried out some repairs and maintenance, as well as clearing the garden. He had hoped to develop the property with the adjoining builder’s yard to sell a new-build residential property, but ultimately, Dolphin was sold undeveloped.
- HMRC denied the VAT claim on the basis that many of the invoices were outside of the four-year time limit and that Mr Webb had only made Exempt supplies of land.
- VAT assessments totalling £21,971 were also raised for the periods 08/18 to 11/20 inclusive. There were no outputs declared in those periods, and the assessments related to input VAT that had been recovered.
- Penalties totalling £4,249 were charged in respect of the inaccuracies.
- HMRC Deregistered Mr Webb for VAT with effect from 28 February 2021.
- Mr Webb Appealed to the First Tier Tribunal (FTT).
The FTT found that:
- Mr Webb’s 2001-02 tax return had been subject to an enquiry in 2004 and 2005. He was relying on the outcome of that enquiry as justification for VAT recovery. However:
- Mr Webb’s business activities in 2001-02 were very different to his activities in more recent years.
- The 2001-02 enquiry was before the merger of the Inland Revenue and Customs and Excise, meaning it was in relation to Income Tax and Capital Gains Tax only. The Inspector of Taxes had merely noted that Mr Webb had been reclaiming VAT, not agreed that it was correct to do so.
- Looking at all of the circumstances, Mr Webb was not carrying on an Economic activity through a business and as such was not entitled to be Registered for VAT nor was he Entitled to reclaim VAT.
- Although Mr Webb had intended to develop Dolphin and the builder’s yard, that had never materialised. There was no evidence of his intention.
- The only supplies made by Mr Webb were the sale of the three properties. While this was a supply for consideration, it was not made for the purposes of obtaining income on a continuing basis.
- Mr Webb had only made supplies that were Exempt from VAT. As such, he was not entitled to any of the input tax he had claimed, regardless of the date on which it was incurred.
The appeal was dismissed.
Useful guides on this topic
Input VAT: What constitutes a valid claim (& VAT invoice)?
What is Input VAT? Who can claim it? What is needed for a valid claim? What needs to be included on a VAT invoice and can you make a claim without one?
Registering for VAT
When should a business register for and charge VAT? What are the VAT registration thresholds? What penalties might HMRC issue for late notification of registration? When do you need to file a VAT return?
Land & Property VAT (Subscriber guide)
An outline of the VAT treatment of some of the more common supplies of land and property.
Land & Property: Dwellings
What is a dwelling for VAT purposes? What is the VAT treatment for construction, conversion, sale, and letting of a dwelling?
Assessments: Best judgment & time limits
What is a 'best judgment' assessment for VAT? When can HMRC raise one? What are your rights of appeal? How do you displace a best judgment assessment? What are the time limits for a VAT assessment?
Deregistration
When do I have to deregister for VAT? When can I voluntarily deregister? What penalties might HMRC issue if I am late notifying them of mandatory deregistration?
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