What constitutes a dwelling for VAT purposes?
This is a question that is often posed when considering the VAT treatment of property.
Whether or not a property can be treated as a dwelling for VAT purposes can have a significant effect on the VAT treatment of the supply of that property, and ultimately on the taxpayer’s ability to recover input VAT associated with that supply.
The recent case of Mitchell & Anor  TC 06418 centered around a failed DIY housebuilder claim. In this case, the taxpayer tried to argue that a possible future event would determine the nature of the supply being made now.
The fact is that a DIY VAT claim can only be successful where the new ‘dwelling’ can be both separately used and disposed of, which often turns on the precise terms of planning permission.
In this case, the planning conditions stipulated that the building ‘shall not be used as a separate residential unit at any time’. This would seem to be pretty cut and dry! Nevertheless, the taxpayer sought to argue that there was a chance that the planners would later agree to remove the restriction in the planning consent.
The courts found little sympathy with this argument, and it is clear that what is important is the reality of the situation at the time of making the claim, and not any speculation about how that situation might change in the future.
Obvious maybe, but worth noting, as whilst this might be the decision the courts reached in this particular scenario, there are circumstances, when dealing with VAT on property, where future intention can have a part to play. So, if you or your clients are in any doubt about the VAT treatment of property, please do get in touch.