Judgment summary
Rachel Maddock appealed against HMRC's rejection of her claim under the DIY housebuilders' scheme for a refund of £63,779.50 of VAT paid on goods used in works at a site on Park Road, Colchester CO3 (1).
The site had a small detached bungalow before the works and a large two-storey house afterwards (2). HMRC rejected the claim on 9 April 2025 and upheld that rejection on review on 20 June 2025 (3).
The Tribunal held that the works did not amount to the "construction of a building" under s35(1A)(a) VATA 1994 because the bungalow did not cease to be an "existing building" within Note 18 to Group 5 Schedule 8 VATA, and the works constituted reconstruction or alteration of an existing building under Note 16 (5). The appeal was dismissed (37).
Background
The Appellant was granted planning permission on 24 September 2021 for works to redevelop the bungalow into the large house (15). The works were completed in accordance with the drawings referred to in the planning permission on 9 September 2024 (18).
Following completion, the Appellant made a claim under s35 VATA for a refund of VAT on goods used in the works (19). HMRC sought and received further information before rejecting the claim, and the rejection was upheld on review (19, 3).
The Appellant's notice of appeal was filed 10 days late; the Tribunal granted permission for the late appeal having regard to the three-stage test in Martland v HMRC [2018] UKUT 178 (TCC), the short delay and HMRC's lack of objection (10).
Core dispute
The issue between the parties was whether the claim satisfied s35 VATA 1994, in particular whether the works amounted to the "construction of a building" (11, 23).
This turned on whether the bungalow had ceased to be an "existing building" under Note 18 to Group 5 Schedule 8 VATA, which required either complete demolition to ground level or retention of no more than a single façade (or, on a corner site, a double façade) as a condition or requirement of planning consent (14, 18).
The Appellant argued that the works were carried out in accordance with planning permission providing for demolition save for retention of a single façade, or alternatively a double façade on a corner site, and that it did not matter that the permission was expressed in terms of extension or alteration (20). HMRC argued the works were an extension or alteration of an existing building because substantially more than a single or double façade remained, and that retention of such a façade was not a condition or requirement of the planning permission (21).
Court findings
The Tribunal found the Appellant's evidence honest and credible and largely unchallenged (7).
Applying the binding guidance in HMRC v J3 Building Solutions Ltd [2017] UKUT 0253 (TCC), the Tribunal considered whether the works fell within Note 18 before turning to Note 16 (25). The bungalow was not demolished completely, so Note 18(a) did not apply (26).
On Note 18(b), the Tribunal rejected the Appellant's primary case that a single façade (the sitting room wall) remained, because numerous other parts of the bungalow also remained, going beyond what the words "no more than" in Note 18(b) permit (28). The alternative double façade/corner site argument failed for the same reason; the Tribunal did not need to resolve the parties' differing interpretations of "corner site" (29).
On HMRC's submission that Note 18(b) could not be satisfied because the planning permission did not expressly require retention of a façade, the Tribunal disagreed, holding that a requirement to build in accordance with plans showing retention of a façade can satisfy Note 18(b), per Boxmoor Construction Limited v HMRC [2016] UKUT 0091 (TCC) (30-32). However, this did not assist the Appellant because the approved plans required retention of considerably more than a single or double façade (32).
Given these conclusions, the bungalow had not ceased to be an "existing building", and the Tribunal found the extensive works fell within the reconstruction or alteration of that existing building under Note 16, applying the broad scope given to those words in J3 (33). The Appellant confirmed the residential conversion argument under Note 7A formed no part of her case (34). The Tribunal noted it was doubtful HMRC could reserve the right to check individual invoices after the event, citing Smithers v HMRC [2020] UKFTT 380 (TC), but did not need to decide the point (36).
Outcome
The appeal was dismissed. The works were held to fall outside s35(1)(a) VATA 1994 and were not eligible for a refund under the DIY housebuilders' scheme (35, 37).
Major issues / areas of contention
- Whether the Bungalow ceased to be an "existing building" under Note 18 to Group 5 Schedule 8 VATA.
- Whether the Works amounted to the "construction of a building" for the purposes of s35(1A)(a) VATA 1994.
- Whether more than a single façade, or a double façade on a corner site, of the Bungalow remained after the Works.
- Whether retention of the façade(s) was a condition or requirement of the Planning Permission.
- Whether the Works constituted reconstruction or alteration of an existing building under Note 16.
- Whether the late appeal should be permitted under the Martland three-stage test.