20400

DIY BUILDERS SCHEME – Appellant claimed refunds in respect of VAT incurred on supply and fit of windows and a supply of a vanity unit – supply and fit of windows zero-rate supply – Appellant not entitled to refund of VAT wrongly charged – vanity unit not building materials – Appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

	PHILIP SIMON GEORGE  	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      MOHAMED FAROOQ	 (Member)	  

Sitting in public in Birmingham on 14 September 2007

The Appellant appeared in person

Victoria Edmonds Shakell, counsel instructed by the Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	The Appellant was appealing against the Respondents’ decision to refuse the repayment of VAT in the sum of £3,182.58 for three invoices submitted as part of a Do it Yourself (DIY) Builders Scheme claim under section 35 of VATA 1994.
2.	The three disputed invoices were:
(1)	Invoice number 949 of QA Window Systems dated 22 December 2000 which related to the supply and fit of windows and doors. The amount of VAT in dispute was £2,800.
(2)	Invoice Number 950 of QA Window Systems dated 22 December 2000 which related to the supply and fit of three Off Dormers and cladding and labour for dormer windows. The amount of VAT in dispute was £208.25.
(3)	Invoice number 5051 of Bansals Limited which related to the purchase of vanity units. The amount of VAT in dispute was £174.33.
3.	The Respondents  refused to repay the VAT in respect of the three invoices because:
(1)	The supplies of  “supply and fit” in invoices 949 and 950  were supplies of services which were zero-rated in accordance with section 30 and item 4 group 5 schedule 8 of VATA 1994. Section 35 of VATA restricted refunds to where the VAT had been correctly charged on the invoices. Further the suppliers of the supply and fit services were the only persons who were entitled to recover the VAT erroneously paid on the invoices. The suppliers were now time barred by the three year rule from recovering the VAT. 
(2)	The supply of the vanity unit in invoice 5051 did not constitute building materials to qualify for zero-rating, and therefore was ineligible for repayment under the DIY Builders Scheme.
4.	The Appellant submitted that he had relied on documentation which had been sent to him by the Respondents advising him that he could reclaim VAT on windows. The Appellant was not an expert on the DIY Builders Scheme and this was the first claim he had made under it. The Appellant considered that he was being treated harshly and could not understand why it was not possible to refund the VAT on the windows if an error had been made. The Appellant saw no distinction between the vanity unit and the fixed kitchen units and wardrobes for which refunds of VAT could be claimed under the scheme.
The Facts
5.	In 1999 the Appellant purchased a property in Sutton in Coldfield which comprised a bungalow with a large industrial unit on a two acre site. The Appellant obtained planning permission to demolish the bungalow and the industrial unit and build a large house with seven bedrooms and three living rooms. The Appellant’s architect advised him that he would be able to recover VAT on certain parts of the building and its construction. The Appellant contacted an Officer in the VAT DIY refunds section at the Wolverhampton office who supplied the Appellant with an information pack about DIY Builders’ claims. One of the documents supplied listed the items allowed and disallowed under the scheme. Windows were specifically mentioned in the list of allowed items.
6.	The Appellant went out to tender for the windows requiring two separate quotes, one for the supply of the windows and the other for supply and fit.  After receiving the quotes the Appellant decided that it would make good commercial sense to opt for a supply and fit contract. He chose QA Window Systems which advised him that VAT was chargeable on the supply and fit contract. The windows were installed at the beginning of 2001. The Appellant paid the two invoices on 12 January and 1 February 2001 respectively.
7.	Around August 2003 the Appellant purchased a vanity unit as a self assembly flat packed item consisting of two doors, two side panels, a top with an inside shelf to be installed around a wash hand basin and pedestal.
8.	The facts regarding the disputed invoices were as stated in paragraphs 2 and 3 of the decision.
9.	After the building was completed, on 3 May 2006 the Appellant submitted a refund claim for £33,747.47 under the DIY Builders Scheme. On the 4 July 2006 the Respondents allowed £30,292.78 of the claim.
10.	The documents supplied by the Wolverhampton VAT Office were part of a local initiative to inform tax payers. The documents have since been withdrawn. The relevant VAT Notice in force at the time the Appellant made his enquiry was VAT Notice 719 issued on January 1996. That notice was re-issued in May 2002 and updated in January 2005. 
Reasons for the Decision
11.	The DIY Builders Refund Scheme aims to put DIY builders of dwelling house in broadly the same position as a developer selling a zero-rated property by refunding the DIY builders VAT on their main construction costs. Section 35 of VATA 1994 sets out the legal requirements of the scheme which provides that the Respondents will only refund VAT that is chargeable on the supply of any goods used by the DIY builder for the construction of a dwelling. Item 4 group 5 schedule 8 of VATA 1994 zero rates the supply of building materials to the DIY builder from a supplier who is also providing services incorporating the building materials into the building.
12.	The effect of item 4 group 5 schedule 8 of VATA 1994 was to zero-rate the supply and fitting of windows from QA Window Systems to the Appellant. Thus QA Window Systems were in error when they charged VAT on the supplies to the Appellant. By virtue of section 35 VATA 1994 the Appellant was not entitled to a refund of the VAT charged on invoices 949 and 950 because the VAT was not chargeable on the supply and fitting of the windows. Only QA Windows Systems were entitled to reclaim the VAT erroneously paid by the Appellant but they are now time barred from submitting such a claim.
13.	Section 35 of VATA 1994 only permits refunds on VAT charged on building materials which are incorporated in the building. Note 22 to group 5 schedule 8 of VATA 1994 defines building materials in  so far as relevant to this Appeal as:
“in relation to any description of building means goods of a description ordinarily incorporated by builders in a building of that description (or its site), but does not include –
a)	finished or prefabricated furniture, other than furniture designed to be fitted in a kitchen.
b)	materials for the construction of fitted furniture, other than kitchen furniture.”
14.	The vanity unit purchased by the Appellant was not building materials. The unit was either prefabricated furniture or possibly materials for the construction of fitted furniture, which are specifically excluded by Note 22 from the definition of building materials. Thus the Appellant was not entitled to a refund of the VAT charged on the supply of the vanity unit. 
15.	The Appellant compared the vanity unit with fitted kitchen furniture and wardrobes, which are exceptions to the general rule that furniture does not constitute building materials. Note 22 specifically includes fitted kitchen furniture in the definition of building materials.  Wardrobes are regarded as building materials only if they enclose a space bordered by the walls, ceiling and floor and three walls of the room are used as part of them. Generally wardrobes are regarded as furniture in the same way as vanity units with the VAT charged on the supply of wardrobes not eligible for a VAT refund under the DIY Builders Scheme.
Decision
16.	We find for the reasons set out above that the Appellant was not entitled to  VAT refunds on the supply and fit of windows  more particularly described in invoices number 949 and 950,  and the supply of the vanity unit, more particularly described in invoice 5051. We, therefore, dismiss the Appeal and make no order for costs.
17.	We have sympathy for the Appellant’s grievance regarding the VAT charged on the supply and fit of the windows. The documentation provided by the Wolverhampton VAT office and the VAT Notice 719, January 1996 edition, current at the time the Appellant made his enquiry, were unclear about the position regarding the supply and fit of windows. Both sets of documents stated that windows were goods on which a VAT claim could be made.  We accept that the new VAT Notice 719 issued in May 2002 was a much improved document than the previous edition, in particular paragraph 9.1 which advises the tax payer about the zero-rating of builder’s services and the need to ensure that the correct VAT is charged on those services. However, the May 2002 edition post dated the supply and fit of the Appellant’s windows by two years. We also accept that it was the responsibility of the Appellant to ensure that he paid the correct VAT. The Appellant, however, did check with the supplier that VAT was payable. In all the circumstances we request that the Respondents consider whether they can refund the VAT payable on the windows to the Appellant under their care and management powers particularly as the VAT should not have been paid in the first place. We acknowledge that our request has no legal force and that there may be very good reasons why the Respondents cannot exercise their care and management powers in the manner suggested. 

                                

MICHAEL TILDESLEY OBE
CHAIRMAN
Release Date: 17 October 2007

MAN/06/0594