Claiming VAT on a barn conversion

The DIY scheme is a means by which a person is able to recover the VAT incurred on the construction of a new dwelling for occupation by themselves or their family.  This occupation can be a main residence or as a second home.  This was not always HMRC’s policy but has been since 2010 following the decision in the VAT tribunal of Mrs Irene Susan Jennings.  The change in policy was confirmed in Brief 29/2010, published at the time.

The documentation and guidance on the DIY scheme for conversions are Form VAT431C and the accompanying notes.  It is important to note the three-month time limit; this is counted from practical completion of the building and is strictly applied by HMRC.

If on the other hand, the intention is for the property to be a holiday let rather than for their own use, then this would be a business purpose and the DIY scheme is not appropriate.  In this situation, the client would be entitled to register for VAT to recover the VAT incurred as input tax and would be required to account for output tax on the lets.

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