Tribunal case – VAT charged in error
A recent VAT Tribunal case examined the entitlement to refund of VAT in respect of the Do It Yourself (“DIY”) Builder’s scheme. This scheme was designed to ensure that a homeowner building a home can benefit from the rules which allow the qualifying construction costs of new homes and certain conversion works to be zero-rated.
The case specifically related to an appeal by a homeowner whose claim for a refund of VAT submitted as part DIY Builder’s Scheme claim had been partially rejected. The rejected invoices related to the installation of doors and windows which all parties agreed were incorrectly issued with VAT charged at the standard rate. The suppliers’ invoices should have been zero-rated.
The homeowner in this case was advised of this fact by HMRC but was unable or unwilling to seek remedy from the suppliers. The homeowner was found to have no claim for refund of the VAT charged by the suppliers on the windows and doors against HMRC.
The Tribunal chairman agreed with HMRC that the homeowner was not entitled to VAT refunds from HMRC in respect of the windows and doors and the appeal was dismissed.
The case quotes an important part of HMRC’s public notice 719 of which all VAT registered businesses should be aware. Section 12.4 of that notice states:
“What if I had been charged an incorrect amount of VAT?
VAT charged in error cannot be claimed from Customs and Excise. When an error occurs, such as when VAT is charged on work that should be zero-rated, your supplier must correct it.”