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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Johnston v Revenue & Customs [2007] UKVAT V19979 (09 January 2007) URL: http://www.bailii.org/uk/cases/UKVAT/2007/V19979.html Cite as: [2007] UKVAT V19979

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19979

DIY BUILDERS SCHEME – Appellant claimed refunds in respect of VAT incurred on wardrobes and re-roofing works – Appellant withdrew her Appeal in respect of the wardrobes – VAT had been incorrectly charged on the re-roofing works – Respondents no power to refund incorrectly charged VAT – Three year capping rule prevented the builders form adjusting their VAT accounts - Respondents requested to exercise their discretion to refund the disputed VAT – Respondents refunded VAT in part – Appeal dismissed

MANCHESTER TRIBUNAL CENTRE

HELEN JOHNSTON Appellant

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Tribunal: MICHAEL TILDESLEY OBE (Chairman)

GILIAN PRATT JP (Member)

Sitting in public in Manchester on 6 October 2006

The Appellant appeared in person

Johnathan Cannan, counsel instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

The Appeal

1. The Appellant was appealing against the Respondents' decision to refuse a refund of VAT in the sum of £4,091.47 pursuant to section 35 of the VATA 1994 ("do it yourself builders scheme").
2. Following further correspondence between the parties the Respondents agreed to make additional refunds which left a disputed sum of £1,049.01 as at the date of the Appeal hearing.
3. The disputed sum related to VAT charged on two items, namely:

(1) £244.10 attributable to wardrobes.

(2) £805 attributable to the roof that was replaced.

4. At the hearing the Appellant withdrew her claim for refund in respect of the VAT attributable to the wardrobes. The Appellant was satisfied with the explanation given to her by the Respondents that the wardrobes did not qualify for zero-rating.
5. The only item in dispute was the VAT in the sum of £805 attributable to the roof that was replaced.

The Facts

6. The Appellant organised the construction of a dormer bungalow at Ulverston, Cumbria, which qualified for refunds of VAT incurred on the construction and building materials under the "do it yourself builders scheme".
7. The roof for the bungalow was severely defective which required the Appellant to instruct new builders to replace the roof. The new builders invoiced the Appellant for the re-roofing works under two separate invoices. The first was dated 24 April 2003 in the sum of £400 plus VAT of £70. The second was dated 12 May 2003 in the sum of £4,200 plus VAT of £735.
8. It was originally thought that the new builders were required to charge VAT on the roofing supplies because they took place after the completion certificate for the building which was dated 11 November 2002. However, it subsequently transpired that the completion date was incorrect. The correct date was the 13 December 2004. The local planning authority issued a new certificate with the correct date. The effect of the new certificate was that the re-roofing works qualified as zero-rated supplies.
9. The problems with the completion certificate meant that the facts regarding the correct VAT status of the re-roofing works did not come to light until after three years had expired from the date of the supplies.
10. In the meantime the Appellant sued the first builders to recover the costs incurred on the re-roofing works. In March 2004 the Appellant obtained judgment against the builders but she was not clear about the precise terms of the court order.

The Issue

11. The Respondents were not lawfully empowered to refund VAT which has been incorrectly charged. Further the new builders could not amend their VAT records to refund the Appellant with the incorrectly charged VAT because of the three year capping rule which prevented amendments to VAT accounts after three years from the date of the supplies. Thus the Appellant was not lawfully entitled to a refund of the VAT incurred on the re-roofing works.
12. We noted that a contributory factor for exceeding the three year cap was the length of time taken by the Respondents to carry out a local reconsideration of the Appellant's refund claim. In those circumstances we requested the Respondents to consider exercising their discretion under their care and management powers to refund the disputed VAT. We adjourned our determination on the Appeal pending the Respondents' reconsideration.

The Respondents' Reconsideration

13. Mrs Nembhard carried out the reconsideration under the Respondents' care and management powers. The Appellant's solicitors provided the Respondents with the details of the judgment of the County Court which showed that the first builders had been ordered to pay the cost of the second invoice dated 12 May 2003 for the re-roofing works in full which included the VAT of £735. The County Court, however, did not award judgment against the first builders for the first invoice dated 24 April 2003 in the sum of £400 plus VAT of £70.
14. Mrs Nembhard formed the view that the Appellant had received the £735 VAT in respect of the first invoice but not the £70 on the second invoice. Mr Simmons of the Respondents' Customer Complaints Service decided to refund the £70 VAT incurred on the second invoice to the Appellant. Mr Simmons agreed that the Tribunal's request was reasonable in the unusual circumstances of this Appeal.

The Decision

15. We express our gratitude to the Respondents for carrying out the reconsideration under their care and management powers. We consider that they have satisfactorily dealt with our request. On the basis that the Respondents have exercised their discretion to refund the VAT incurred on the second invoice in the sum of £70 and our finding in paragraph 11 we dismiss the Appeal. We make no order for costs.

MICHAEL TILDESLEY OBE

CHAIRMAN

RELEASE DATE: 9 January 2007

MAN/