[2010] UKFTT 267 (TC)

TC00561

Appeal ref: TC/2009/13431

VAT – DIY Builder’s Scheme – Appellant claiming refund in respect of VAT charged and paid – whether refund payable – no – appeal dismissed

FIRST-TIER TRIBUNAL
TAX

 	
					SEAN HARRISON - DEVEREUX	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: 	Lady Mitting (Judge)
		Carol Roberts (Member)
			
Sitting in public in Manchester on 17 May 2010

The Appellant appeared in person

Mr. Bernard Haley instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2010
DECISION

1.	The Appellant appeals against the refusal of the Commissioners to refund, under the Do It Yourself House Builder’s Scheme the sum of £4,374.67, the original notification of refusal being dated 18 February 2009.
2.	The claim arises out of the construction by the Appellant of “The Piggery” a dwelling house for himself and his family.  The original contractor was a Mr. J P Marsden, subsequently replaced by R A Berry & Son Ltd, after an unacceptable slippage on timescale.  Construction started in May 2003 and should have been completed in October 2003.  The Appellant and his family moved in in January 2004 and thereafter lived in something of a building site.  The physical building of the property was completed in mid-July 2004 but there remained outstanding an incomplete drainage system and the creation of a stone-set driveway and a York Stone path and patio.  All these projects were completed, as per the approved original plans, by Mr. Berry.  A temporary drainage system had originally been put in by Mr. Marsden but it had always been known that this would have to be replaced by a permanent system. The work on all three projects was completed by Mr. Berry by December 2005 and during October, November and December of that year he put in a series of four invoices, all of which included VAT, covering the labour and the materials needed for all three projects.  By December 2005 the entire property had therefore been completed but there followed a protracted argument between the Appellant and Kirklees Council Planning Department in an attempt to obtain a certificate of completion.  The certificate of completion was eventually signed on 7 January 2009 and on 11 January 2009 the Appellant made his claim to the Commissioners for recovery of all the tax he had paid.  We understand there were two reasons for the delay in obtaining the completion certificate.  First there was internal wrangling within the Planning Department which culminated in a second building inspector referring to the first inspector as overzealous.  The second reason for the delay was due to personal circumstances within the Appellant’s family and indeed we were told this accounted for two complete years.  When the Appellant put in his claim for repayment, the bulk of the claim was met but the tax paid on Mr. Berry’s four invoices was refused.  It had been the belief of Mr. Berry and the Appellant that because the house was physically complete by the time Mr. Berry began work and he was not the original contractor then VAT should be charged on the invoices and this would be reclaimed by the Appellant.  In the post-refusal correspondence between the parties there appears to have been some confusion within HMRC as to whether or not the VAT was correctly charged and the reason for refusal.  However we deal with the case as put to us and our interpretation of the scheme.
3.	The first reason for refusal had been that VAT should not have been charged in the first place.  As soon as this was made known to the Appellant, Mr. Berry made an application to amend his own VAT account, thus allowing him to reclaim the VAT which he had overpaid and repay the Appellant.  However the amendment of the account was not allowed as Mr. Berry was by this time, albeit by only a matter of days, outside the statutory three-year time limit for making the adjustment.  The Appellant made the point to us that he was in effect not seeking from the tribunal a direction that the Commissioners make a repayment to him, but that they allow Mr. Berry to amend his own account and seek repayment.
4.	Section 35 VAT Act 1994 permits the house owner to reclaim repayment of VAT charged to him by his builder in respect of the provision to him of goods but not of services.  The provision of services is covered by item 4, group 5, schedule 8 of the Act which zero-rates, “the supply of building materials to the person to whom the supplier is supplying services… which include the incorporation of the materials in the building in question”.
5.	The question for the tribunal is therefore whether the claim arises out of a supply of goods or a supply of services.  We accept that a major component of the invoices was the cost of materials.  In particular the invoices which related to the construction of the patio and the driveway charged for the cobbles and the York Stone.  However it is clear to us that the invoices charged are for the supply and construction of a patio and a driveway, albeit that the invoices also contained the materials incorporated.  Equally the construction of a new drainage system was in our view a supply of services, albeit there was an element of materials in the invoice.  Given that all three projects were therefore, in our view, supplies of services, it follows that Mr. Berry should have zero-rated them.  No VAT should therefore have been charged to the Appellant and he would not have been in the position of having to make a reclaim.  The Commissioners were therefore correct in their refusal of the Appellant’s refund.
6.	We have every sympathy for the Appellant and Mr. Berry but the dilemma of Mr. Berry lies between himself and the Commissioners and is no concern of the tribunal.  It is unfortunate that, for reasons that we fully understand, Mr. Berry’s application to adjust fell foul of the capping provisions but again that is not something that we the tribunal can do anything about.  The tribunal can only act within the remit of its jurisdiction, as indeed can the Commissioners.
7.	In summary therefore we find that the invoices from Mr. Berry to the Appellant are for the supply of services which should have been zero-rated.  The Appellant is not therefore entitled to any refund of the VAT which was incorrectly included in the invoices.  The appeal therefore is dismissed.  No application for costs was made and we make no order.
The Appellant has a right to apply for permission to appeal against this decision in accordance with rule 39 of the Rules.  The parties are referred to “Guidance to accompany a decision from the First-Tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

LADY MITTING
JUDGE
Release Date: 14 June 2010