Can I reclaim VAT on a permitted development project?

4 July 2017

I am about to commence the construction of a timber framed bungalow/lodge which falls within the official definition of a mobile home. When the project is complete it will be my sole permanent residence. The work is covered under permitted development rights. Can the VAT be reclaimed in a similar manner to conventional self-builds?

Answers

The key is whether or not the terms of your planning permission prevent the separate disposal, or separate use, of the new building from any other pre-existing building and that is not clear from your letter. VAT notice 431 is very clear that the DIY reclaim is only applicable to a building ‘designed as a dwelling in its own right’ which means it can be sold as a separate house with its own title and that excludes any annexes and outbuildings.

To get a refund you must provide evidence that the works are lawful and you must provide a copy of the planning permission. This will either be a full planning permission or an outline planning permission and approval of reserved matters, although it does refer elsewhere to ‘or similar permissions’ which could arguably include permitted development rights.

To my mind, if this property is being build under permitted development rights that implies that it is a subservient part of another property and if it is, then you won’t be able to reclaim the VAT on the materials used. However, I think it would be worth calling the VAT helpline on 0300 200 3700 for their opinion. Explain the situation and they can advise whether or not this project will qualify.

Mike Hardwick (Build It expert)

4 July 2017
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