HMRC Concedes VAT Change On Holiday Homes

by Jason Gorringe, Tax-News.com, London

23 June 2010

The UK tax authority, HM Revenue and Customs (HMRC) has announced that value-added tax (VAT) associated with conversion and construction of holiday homes is now recoverable under the DIY Housebuilders and Converters Scheme, and that any VAT incurred over the past four years can be reclaimed.

The decision follows a VAT Tribunal where it was argued successfully that the VAT on costs of materials and services supplied in the construction of new holiday homes and the conversion of non-residential buildings into holiday homes by an individual for non business purposes should be recoverable.

Commenting on the development, Terry Dockley, VAT director at accountants and business advisers, James Cowper, said: “The decision applies to individuals who purchase land or buildings with the view to build new holiday homes or convert existing buildings into holiday homes. It effectively applies the same VAT recovery as enjoyed by self-builders under the ‘DIY Housebuilders and Converters Scheme’”.

The DIY Housebuilders and Converters Scheme was first introduced in 1974 and refunds VAT incurred on the cost of building materials and on conversion services for private individuals.

“It has long been an anomaly that if the same person were to build or convert a property for holiday lets it would not attract the same VAT treatment as if building their own home,” adds Terry. “This ruling makes a lot of sense. Holiday home owners will also be particularly pleased that HMRC is allowing claims for work going back over four years, if supported by a certificate of completion.”

Concluding, Terry warned: “However, if a developer purchases land and then goes on to build or convert the holiday homes, VAT will be charged at the standard rate.”

Recommended