DIY Housebuilder VAT Refund Refused? How To Appeal HMRC's Decision

You built or converted your own home and claimed back the VAT under HMRC's DIY housebuilders scheme. Now HMRC has refused the claim, paid only part of it, or rejected it as too late.

Start with the date on HMRC's letter: from it, you have 30 days to accept HMRC's offer of a review (section 83C(1)(b) Value Added Tax Act 1994, "VATA 1994"), or 30 days to appeal to the tax tribunal (section 83G(1)). Sending HMRC more information does not stop either clock; only an extension HMRC confirms in writing extends them (section 83D).

Some refusals can be overturned at the tribunal, some only HMRC or your builder can fix, and a few cannot be fixed at all. This guide sorts yours. If you have not claimed yet, watch the time limit (6 months), HMRC's one-claim policy, the completion date and wrong-rate VAT, and photograph fitted wardrobes before you fill them.

How The DIY Housebuilders Scheme Works (And What It Never Refunds)

Section 35 VATA 1994 refunds VAT on building your own home (and some communal and charitable buildings, outside this guide), if the work is lawful and not done in the course of a business.

• New build: VAT on building materials only, meaning goods incorporated in the building or its site (section 35(1B)).
• Conversion: materials, plus a contractor's VAT on the conversion work (section 35(1C)), normally charged at the reduced rate of 5% (section 29A; Schedule 7A).

You make one claim, online or on form VAT431NB (new builds) or VAT431C (conversions), no later than 6 months after the building is completed (regulation 201(1)(a) VAT Regulations 1995). Until 5 December 2023 the limit was 3 months. The claim needs the building control completion certificate, your planning permission and the plans. Invoices are no longer sent with it, but HMRC can require documents and refuse all or part of the refund if they are not produced (section 35(2A) to (2C)).

The scheme never refunds:

• wrong-rate VAT;
• labour and other services on a new build, which should be zero-rated (VAT at 0%);
• architects', surveyors' and supervisors' fees;
• furniture (except fitted kitchen furniture), carpets, or most appliances (Note (22) to Group 5 of Schedule 8), though heating, hot-water, ventilation, air-cooling and alarm systems do qualify.

HMRC's list of goods and services also excludes tools, scaffolding, skips, hire charges (except, on a conversion, machinery hired with an operator or driver), and planning and building regulations fees.

A careless or deliberate error in a claim can lead to a penalty (Schedule 24 Finance Act 2007, paragraph 1; see HMRC penalties explained).

The scheme is UK-wide. In Scotland, a verifier accepts the completion certificate.

Read Your Refusal Letter First

Check four things: whether the refusal is whole or partial (a partial one should list the items), the reason, the date, and the review offer, which HMRC must make with the decision (section 83A). Then find each reason below (our summary, not HMRC's wording).

If HMRC Says Your Claim Was Late

The Tribunal Cannot Extend The Time Limit

The DIY rules contain no reasonable excuse defence for a late claim and no power to extend the time limit. In HMRC v Patel [2014] UKUT 361 (TCC), a planning permission case, the Upper Tribunal, whose decisions bind the tax tribunal, held that the requirements are mandatory: "HMRC are allowed no discretion to accept something less than the prescribed documentation, nor to extend the time limit, and it is equally not open to the FTT or to us to do so" ([21]). They are "strict", and cannot be waived "even if they lead to what appears to be an unfair result" ([23]).

In McGuire v HMRC [2026] UKFTT 1225 (TC), the claim went in more than two years after the completion certificate, following a serious injury to the appellant's wife ([4], [9]). Asked to direct HMRC to accept it, the tribunal said: "In our judgment, no such power exists" ([24]). The appeal was struck out (ended early) because it could not succeed ([28] to [29]).

Contrast penalties, where a reasonable excuse can be a defence, and late appeals, which the tribunal can allow with permission (section 83G(6); Martland v HMRC [2018] UKUT 178 (TCC); late appeals).

Check When Your Home Was Actually Complete

The clock runs from completion, not necessarily the day you moved in. Regulation 201(1)(b)(i) asks for a local authority completion certificate or other evidence of completion that HMRC finds satisfactory. HMRC's new-builds guidance says: "A building is still under construction up until the date a certificate of completion is issued by the local planning authority."

HMRC has argued in past cases for an earlier, moving-in date; First-tier decisions have gone both ways. Dunbar v HMRC [2019] UKFTT 747 (TC) held that completion takes place "when a certificate of completion is issued" or, without one, on a date shown by documents HMRC accepts ([47]). Sansom v HMRC [2020] UKFTT 198 (TC) also accepted the certificate date, nearly five years after the family moved in, rejecting "some uncertain and imprecise multifactorial test" ([72]). Fraser v HMRC [2019] UKFTT 573 (TC) treated the home as complete well before the certificate ([24] to [25], [35]).

None of these binds another tribunal, and Dunbar found the claim would have failed if its reading were wrong ([49] to [53]). In Scotland, Cotton v HMRC [2020] UKFTT 57 (TC) held a conversion incomplete until its completion certificate was accepted ([69], [73] to [75]), because occupying it earlier, without the verifier's permission for temporary occupation, is an offence (section 21 Building (Scotland) Act 2003). But the home in Fraser was also in Scotland, and that tribunal went the other way without considering section 21, so do not rely on Cotton to delay a claim.

Evidence: the certificate, and proof that work was still going on (invoices, dated photographs, building control correspondence). Never choose or delay a date to stretch the window.

Asking HMRC To Accept A Late Claim

HMRC's manual says that "exceptionally, claims may be accepted on an individual basis if there is a reasonable excuse for the delay" (VCONST24550). The claimant "must explain in writing why a claim is being submitted late", and "If no satisfactory explanation is received, the claim must be refused." Its examples include "compassionate reasons", "negligence of a professional adviser" and "difficulty in obtaining invoices or completion certificates".

That is policy, not a legal right. If you did not explain the delay when you claimed, do so at the review, with evidence.

The tribunal cannot apply the policy (McGuire [24], [26]). If HMRC refuses, the route is judicial review (a court's check on whether a public body acted lawfully), not the tax tribunal (HMRC v Hok Ltd [2012] UKUT 363 (TCC)).

In England and Wales that means the High Court, promptly and in any event within three months of HMRC's refusal. Neither a review nor a tribunal appeal pauses that deadline. Scotland and Northern Ireland have their own courts and rules. Take advice as soon as HMRC first refuses your late claim, and straight away if a review has already upheld the refusal.

If HMRC Says You Have Already Made Your Claim

HMRC's policy is one claim per build, and its guidance warns: "You cannot make a second claim if you choose a date earlier than the completion certificate and use other evidence of completion."

The law is less settled. In Lawton v HMRC [2024] UKFTT 892 (TC), the tribunal held that "HMRC were entitled to insist that only one claim was made under the VAT Scheme" ([61]). The earlier Ellis and Bromley v HMRC [2021] UKFTT 343 (TC) held regulation 201 "ultra vires" (beyond the powers the Act gives) so far as it limits a self-builder to a single claim ([42], [45] to [46]).

Neither binds other tribunals, and we found no Upper Tribunal decision. Plan for one claim.

That bites on phased builds: in Lawton, a claim for a barn conversion, made on a completion certificate before all the permitted works were finished, was held to be the only claim allowed ([63] to [66]).

If invoices surface after your claim is paid, HMRC's guidance lets you send them no later than 4 years after completion, and its manual lists the invoices it may pay, such as ones left out by mistake or issued late by a contractor (VCONST24550). That is policy, not law.

If HMRC Refused Some Of Your Items

On a new build, only building materials qualify (section 35(1B)), less the Note (22) exclusions. HMRC's list is guidance; the tribunal applies the law.

In Mort v HMRC [2023] UKFTT 387 (TC), Mr Mort represented himself, challenged HMRC item by item, and recovered an extra £16,683.81 ([99]). A builder who supplies and fits materials on a new build should zero-rate the whole job, leaving no VAT to refund, while goods bought on their own carry refundable VAT. Where one invoice covers both, the tribunal decides what was really supplied ([39] to [42]). Mr Mort's custom security gates, installed by their supplier, were mainly goods, so he recovered their VAT ([71] to [73]).

Wardrobes are a trap. Only the basic fitted wardrobe described in VAT Notice 708 (paragraph 13.5.2) qualifies, and HMRC's list says "if a fitted wardrobe is included in a DIY claim, photographic evidence of eligibility is required". Photograph the insides before you fill them. Mr Mort lost on bespoke bedroom furniture, including wardrobes, carrying VAT of £16,354.63 ([88] to [98]).

Missing or incomplete invoices, and missing proof of payment, are usually fixed with HMRC, not the tribunal. HMRC's guidance says a VAT invoice must show, among other things, the supplier's VAT registration number and, above £250, your name and address. Get a proper invoice from the supplier and send it with your review request (section 83F(4)).

VAT Your Builder Charged By Mistake

In Dowey v HMRC [2026] UKFTT 626 (TC), a dispute over VAT on a bespoke kitchen, the tribunal said section 35(1) "does not permit HMRC to refund VAT that has been incorrectly charged at a rate that was not applicable" ([14]). Only the supplier can reclaim overpaid VAT from HMRC under section 80 VATA 1994, so Mr Dowey's appeal was struck out ([19] to [24], [26]).

On a conversion wrongly charged at the standard rate, HMRC still refunds VAT at the reduced rate of 5% (VCONST24150), and the excess is for your builder to correct. Either way, ask your builder now for a credit note and a corrected invoice, because the supplier's own correction is time-limited. If the builder has gone out of business, take specialist advice.

If you dispute HMRC's view that a supply should have been zero-rated, the tribunal can decide that, item by item (Mort [39] to [42]).

If HMRC Says The Building Doesn't Qualify As A Home

Planning Conditions That Tie The House To Something Else

Under Note (2)(c) to Group 5 (applied by section 35(4)), the home qualifies only if no covenant, planning permission or similar provision prohibits its separate use or disposal. HMRC v Summit Electrical Installations Ltd [2018] UKUT 176 (TCC) sets the test: "A prohibition on separate use ... will not be found unless the effect of the relevant term in the particular case is to prohibit use of the premises separately from the use of other specific land" ([29]).

Conditions tying the house to something else fail: working at a specified location (HMRC v Shields [2014] UKUT 453 (TCC) at [56]), use ancillary to a main house (HMRC v Lunn [2009] UKUT 244 (TCC) at [15]) and, in HMRC's view, granny annexes (VCONST14140). Restrictions without that tie can pass: holiday-use conditions (Akester v HMRC [2017] UKUT 404 (TCC) at [36]), occupation by students of two named universities (Summit [38]) and, in HMRC's view, agricultural, forestry and age conditions (VCONST14140). The question is what the house is tied to, not who may live there.

HMRC's manual adds that a time-limited condition, or one that "can be set aside, such as through paying a penalty", is not an absolute prohibition: worth raising at review, though Summit is the binding test. Section 106 agreements (planning obligations agreed with the council; section 75 in Scotland) count too; send HMRC a copy.

Removing a condition after the build comes too late (Akester [39]; Shields [40]), though HMRC accepts that a removal effective before completion helps from that point (VCONST14160). Patel left open whether a retrospective permission produced before the claim deadline would be enough ([22]). Evidence: the full decision notice, the approved plans, any section 106 or 75 agreement, and a plan showing what, if anything, the condition ties the house to.

Building What Your Permission Allowed

Note (2)(d) (planning permission, and building in line with it) and the lawfulness condition in section 35(1)(b) "clearly overlap" (Akester [37]). Mr Patel's permission was for an enlargement, but the house was demolished and rebuilt; when he claimed, he had no permission for the works actually done, so the claim failed ([21]).

HMRC's guidance adds: "Approval for building regulations purposes is not planning permission." For a two-part permission, HMRC "will need to see both". Evidence: the permission and any variations, and the approved plans compared with what you built.

What You Intended While You Were Building

In Akester, the Upper Tribunal held that a later breach of a use condition "will not prevent a person making a claim ... provided that, at the time of the construction works, there was no intention to breach the condition" ([40]). That cuts both ways: later use "may be evidence of the intended use during construction" ([40]). Mr Akester, who represented himself, won in the Upper Tribunal, which sent his case back for the First-tier Tribunal to find whether he had decided, during the build, to live there permanently ([41]).

The business test in section 35(1)(b) also looks at the build, not later use (Akester [47]), and building to let "can be an economic activity" ([46]). HMRC's guidance accepts a family home for you or your relatives "for residential or holiday purposes", and its manual confirms that holiday homes can qualify (VCONST14220). The same guidance treats building "because you need to live where you work" as a business purpose; we found no tribunal decision on that view. Useful evidence comes from the build period: correspondence, mortgage type, council tax records and family circumstances.

Replacement Homes, Conversions, Extensions And Garages

A replacement home is a new build only if the old building was demolished completely to ground level (HMRC's guidance lets you keep cellars, basements and the ground-level slab), or all that survives above ground is a single facade (a double facade on a corner site) kept because the planning permission requires it (Note (18)). Otherwise the work is not a new build (Note (16)(a)), and it can qualify only as a conversion of a non-residential building.

A conversion turns a non-residential building, or part of one, into a home (section 35(1D)); professional fees are excluded (section 35(1C)). A building designed as a home counts as non-residential only if it was built more than 10 years before the work began and no part of it was lived in during the 10 years before that (Note (7A)). HMRC's conversions guidance asks for an Empty Property Officer's letter, or alternatives such as electoral roll, council tax or utility records.

A garage built or converted with a home, to be occupied with it, is included (Note (3)). Converting a garage occupied with a house is not converting a non-residential building (Note (8)). For a domestic garage, HMRC's guidance asks for proof that it was no longer domestic: not used to store vehicles for 10 years before work started, and adapted to another use for a considerable time.

Where the building already contains a home, the conversion must create an additional dwelling (Note (9)). In Customs and Excise Commissioners v Blom-Cooper [2003] EWCA Civ 493, a former pub with the publican's home upstairs became one family house, and the claim failed ([27]). HMRC v Jacobs [2005] EWCA Civ 930 set the test: count the dwellings before and after the conversion, and "If there are more on the recount, Note (9) is satisfied" ([40]). The taxpayer won, though work on parts already residential was excluded ([44]).

An extension counts only if it creates an additional dwelling (Note (16)(b); Lawton [67]). HMRC's example: "a new qualifying flat built on top of an existing building would be within the refund scheme. The conversion of a loft space into a flat would not." On mixed works, the words "to the extent that" in section 35(1D) limit the refund to the qualifying part.

Your Options: More Information, A Review Or An Appeal

More information. HMRC's guidance offers this, but it is not a statutory step and does not stop the clock. If you need time, ask HMRC in writing, well before the review window ends, to extend it. An extension counts only if HMRC confirms it in writing before the window closes (section 83D(1)); the appeal deadline then moves with it (section 83G(1)(b)).

A statutory review by an HMRC officer not previously involved (see HMRC's internal review):

• accept the offer within 30 days of the letter's date (section 83C(1)(b));
• if a reasonable excuse made you miss that, ask in writing without unreasonable delay once the excuse ends: HMRC must then review if it accepts the excuse, unless you have appealed (section 83E);
• you cannot accept once you have appealed (section 83C(2));
• send your evidence and arguments with your acceptance, so the reviewer must consider them (section 83F(4));
• HMRC has 45 days to give its conclusions, or longer if you agree (section 83F(6));
• if it misses that deadline, the decision is treated as upheld and you can appeal (section 83F(8); section 83G(5));
• after the review, you have 30 days from the date of the conclusion letter to appeal (section 83G(3)).

An appeal straight to the tribunal, within 30 days of the decision letter's date (section 83G(1)). There is no fee to appeal, and nothing to pay HMRC first. See how to appeal and form T240. If you miss the deadline, a late appeal needs the tribunal's permission (section 83G(6); Martland).

A review suits missing documents, a late-claim explanation, and item disputes with new evidence. An appeal suits a dispute about the law, such as a planning condition, the completion date or the conversion rules, once your evidence is together. You can also have a review and then appeal.

What The Tribunal Can And Cannot Do

DIY appeals go to the First-tier Tribunal (Tax Chamber) under section 83(1)(g) VATA 1994.

It can decide whether the statutory conditions are met, even on an outright refusal (Blom-Cooper [3]; McGuire [27]), which items qualify (Mort), and the amount due. In Sansom, where HMRC had refused only for lateness, the tribunal fixed the refund at £17,641.48 ([74] to [76]). That is a First-tier view, but it is a reason to bring your invoices and calculation even if HMRC refused only on time or eligibility. The burden of proof is on you, on the balance of probabilities, meaning more likely than not (Lawton [27]; Mort [52]).

It cannot extend the claim deadline, apply HMRC's late-claim policy, order a refund of wrong-rate VAT, or rule on fairness or on wrong advice from HMRC (Hok). In Sewell v HMRC [2024] UKFTT 773 (TC), the grounds rested on wrong HMRC advice, and the judge held: "I have no jurisdiction to deal with these grounds of appeal" ([30]). The lesson is to argue the statutory conditions (writing grounds of appeal). Wrong advice is a matter for a complaint to HMRC, then the Adjudicator's Office.

Small, document-based appeals may be decided without a hearing, as Dowey was; if you want one, ask the tribunal in writing (rule 26(7)). Costs are usually awarded only for unreasonable conduct, and Complex cases differ (tracks and costs; unreasonable conduct costs). An appeal typically takes 6-12 months to reach a decision; see also settling your case and hearing preparation.

HMRC pays no repayment interest on a DIY refund (SI 2022/1298, article 2). If an HMRC error delayed yours, you can ask in writing for interest under the older official-error rule (section 78 VATA 1994). Legislation.gov.uk shows section 78 as omitted, but only for VAT on registered businesses' returns for periods beginning on or after 1 January 2023, and some related amounts (SI 2022/1298, article 1(3)(b)); the order's explanatory note says the old rules stay in place for the refunds in its article 2, which include DIY refunds. We found no tribunal decision testing this. If you lose, permission to appeal to the Upper Tribunal on a point of law must be sought within 56 days of the date the tribunal sends its full written reasons. If the decision gives no reasons or only a summary, ask for full written reasons straight away: you need them to appeal.

What To Do Now

1. Diarise both dates from HMRC's letter, counting its date as day one: 30 days to accept the review, and 30 days to appeal.
2. Identify HMRC's reason, and the amount in dispute for each item.
3. Route each problem: HMRC (a late-claim explanation, missing documents), your builder (wrong-rate VAT), or the tribunal (the statutory conditions, items, the completion date).
4. Gather the evidence for your ground.
5. Ask for a review with your evidence, or appeal. If you need more time, ask HMRC early, in writing, to extend the review window; an extension counts only if HMRC confirms it before the window closes. If your only problem is a late claim, with no dispute about when your home was complete or when you claimed, the tribunal cannot help: take advice on judicial review now, without waiting for the review.
6. If the review goes against you on a point the tribunal can decide, appeal within 30 days of the conclusion letter. Argue the statutory conditions and include your calculation.
7. Ask your builder now for a credit note for any VAT charged at the wrong rate.
8. If the sums or the issues are large, get help.

Key Legislation And Resources

Legislation

• Value Added Tax Act 1994, section 35—the DIY refund: conditions, goods, conversions and document notices
• Schedule 8—the Group 5 notes, applied to DIY claims by section 35(4)
• Section 29A and Schedule 7A—the reduced rate for conversion work
• VAT Regulations 1995, regulation 201—the claim, its time limit and documents
• Section 83—appealable decisions, including (g) for DIY refunds; section 83A—the review offer; section 83C—accepting it; section 83D—extensions; section 83E—a late review; section 83F—the review; section 83G—appeal deadlines
• SI 2022/1298, article 2—no repayment interest on DIY refunds
• Finance Act 2007, Schedule 24, paragraph 1—penalties for inaccurate claims
• Building (Scotland) Act 2003, section 21—no occupation before a completion certificate is accepted, unless temporary occupation is permitted

Key Cases

• HMRC v Patel [2014] UKUT 361 (TCC)—claim requirements are mandatory; no power to extend or waive them
• HMRC v Summit Electrical Installations Ltd [2018] UKUT 176 (TCC)—the Note (2)(c) test: a tie to other specific land
• Akester v HMRC [2017] UKUT 404 (TCC)—holiday conditions, late removal, intention during the build, business test
• HMRC v Shields [2014] UKUT 453 (TCC)—a condition to work at a specified location is a prohibition
• HMRC v Lunn [2009] UKUT 244 (TCC)—use tied to a main house fails Note (2)(c)
• Customs and Excise Commissioners v Blom-Cooper [2003] EWCA Civ 493—Note (9) applies to DIY conversions
• HMRC v Jacobs [2005] EWCA Civ 930—the Note (9) recount test for an additional dwelling
• HMRC v Hok Ltd [2012] UKUT 363 (TCC)—no tribunal jurisdiction over fairness; our analysis
• Martland v HMRC [2018] UKUT 178 (TCC)—the test for permission to appeal late; our analysis
• McGuire v HMRC [2026] UKFTT 1225 (TC)—late claim after serious injury; no power to direct HMRC
• Mort v HMRC [2023] UKFTT 387 (TC)—item-by-item appeal; supply and fit; bespoke furniture
• Dowey v HMRC [2026] UKFTT 626 (TC)—wrong-rate VAT; only the supplier can claim under section 80
• Sewell v HMRC [2024] UKFTT 773 (TC)—wrong HMRC advice is not a ground the tribunal can hear
• Lawton v HMRC [2024] UKFTT 892 (TC)—one-claim policy upheld; burden of proof; the extension claim failed
• Dunbar v HMRC [2019] UKFTT 747 (TC)—completion is the certificate date unless other evidence is accepted
• Sansom v HMRC [2020] UKFTT 198 (TC)—certificate date accepted; the tribunal fixed the refund
• Fraser v HMRC [2019] UKFTT 573 (TC)—a Scottish home complete before the certificate; appeal dismissed
• Cotton v HMRC [2020] UKFTT 57 (TC)—Scotland: not complete until the completion certificate is accepted
• Ellis and Bromley v HMRC [2021] UKFTT 343 (TC)—regulation 201 invalid so far as it allows only one claim

GOV.UK Guidance

• VAT refunds for new builds if you're a DIY housebuilder—eligibility, completion, the single claim and refusals
• VAT refunds for conversions if you're a DIY housebuilder—conversions, empty-building evidence and garages
• Goods and services you can claim for under the VAT DIY Scheme—HMRC's A to Z of allowable items
• Claim a VAT refund for a new home or charity building—the online claim and form VAT431NB
• Claim a VAT refund for a conversion—the online claim and form VAT431C
• Buildings and construction (VAT Notice 708)—including the basic fitted wardrobe (paragraph 13.5.2)

HMRC Guidance

• VCONST24550—late claims and supplementary payments
• VCONST14140—what counts as a prohibition on separate use or disposal
• VCONST14160—removing a prohibition
• VCONST24150—only VAT properly chargeable is refunded
• VCONST14220—holiday homes

On This Site

• Understanding Your Appeal Rights: What HMRC Letters Actually Mean
• HMRC's Internal Review: What It Is and Whether To Request One
• How To Appeal to the Tax Tribunal: A Step-by-Step Guide
• Form T240: How To Fill In Your Tax Tribunal Notice Of Appeal
• Writing Your Grounds of Appeal: What To Say (And What To Avoid)
• Missed the Deadline? How To Make a Late Appeal to the Tax Tribunal
• The Complete Timeline of a UK Tax Dispute
• Do You Need A Representative At The Tax Tribunal? Free Help, Paid Options And Going It Alone

This article is for informational purposes only and does not constitute legal or tax advice. For advice specific to your situation, consult a qualified tax adviser, accountant, or solicitor.