Policy paper

DIY Housebuilders Scheme — power to request evidence

Published 6 March 2024

Who is likely to be affected

Any person who is building their own home, or converting a non-residential building to their own home, and who wishes to reclaim the Value Added Tax (VAT) incurred.

The VAT Refund Scheme for DIY Housebuilders (Scheme) covers both entirely self-build housing and the self-build element of custom housebuilding.

General description of the measure

The measure introduces a power in primary legislation allowing HMRC to request claimants to produce further documents by way of evidence (including invoices), as may reasonably be required, to fully verify a submitted DIY Housebuilders claim.

Currently, under the Scheme, a claimant is required to submit certain documentation and information at the time the claim is submitted, including a list of all the relevant invoices. In order to fully verify claims, and carry out compliance checks where required, HMRC needs to be able to call for further evidence where necessary.

Policy objective

The objective is for HMRC to have an additional power to request further evidential documentation after a claim has been submitted to validate the claim and carry out compliance checks. This reduces the potential risks of overpayment of VAT or invalid claims.

Background to the measure

The Scheme allows non-VAT registered individuals building their own home for residential purposes, or converting a non-residential building to their own home, to submit a claim to recover the VAT they incurred during the construction. The Scheme puts these individuals in a similar position to housing developers, who can zero rate the construction of new houses.

The government announced at Spring Budget 2023 that it would:

(i) enable claimants to submit their VAT refund claims digitally, as an alternative to the existing paper format, and

(ii) extend the time limit for submitting such claims from 3 months to 6 months after completion of the build. These changes came into effect on 5 December 2023.

Prior to this date, DIY housebuilders claims had to be accompanied by all original relevant invoices. There can be up to 200 invoices per claim.

Under the new process, claimants only need to provide details of each relevant invoice on the claim form. HMRC’s processing team then chooses a selection of invoices and in some cases, other documentation as deemed reasonable, to make further enquiries about the claim, using a risk-based method. The claimant is then asked to submit the selected invoices (and any other documents where requested). This approach avoids the burden on claimants having to provide copies of all the invoices upfront, and on HMRC to store them.

While this new process is in place operationally, currently, HMRC Commissioners do not have a power under the Scheme itself to require claimants to submit invoices or any other documentation not required on submission of the claim.

Detailed proposal

Operative date

The measure will have effect on and after the date of Royal Assent to Spring Finance Bill 2024.

Current law

Currently:

• under section 35(2) of the VAT Act 1994, the Commissioners are not required to entertain a claim for a refund of VAT unless the claim is made in accordance with regulations
• the Commissioners have exercised the power in section 35(2) to make regulation 201 of the VAT Regulations 1995, which outlines the method and time for making a claim. Under regulation 201, claimants are required to provide all information required on the claim form at the time of submission of the claim, along with the documents specified in the regulation (certificate of completion of the build, evidence of importation for imported goods where applicable, planning permission, surveyor’s certificate, etc.)
• significantly, there is currently no requirement to provide invoices on submission of the claim (though the claim form itself requires full details about relevant invoices), and the Commissioners have no power under the scheme itself to request invoices or other documents from a claimant after submission of a claim

Proposed revisions

A new power in primary legislation to underpin existing operational practice, allowing the Commissioners to request further evidential documentation (including invoices) in order to validate a claim.

Summary of impacts

Exchequer impact (£million)

2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029
Nil	Nil	Nil	Nil	Nil	Nil

This measure is not expected to have an Exchequer impact.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure is not expected to have an impact on the estimated 6,000 individuals using the scheme per annum, as the new claims process introduced in December 2023 is unchanged.

This is a technical amendment to ensure that the policy works as intended.

Equalities impacts

It is not anticipated that there will be impacts for those in groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is not expected to impact on businesses or civil society organisations as it only impacts individuals building their own home.

Operational impact (£million) (HMRC or other)

This measure is not expected to have an impact as the new digitised claim process introduced in December 2023 is unchanged.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from tax receipts and new build/conversion documentation.

Further advice

If you have any questions about this change, contact Lisa Allen by email: [email protected].