Residential conversions and VAT

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Update – July 2014

“It is our view that any relevant permitted developments under the Permitted Developments Order satisfy Note 2(d) in respect of the requirement that statutory planning consent has been granted in relation to that dwelling. The inclusion of certain types of development in such a Permitted Development Order equates to a removal of the need to apply for planning permission not that a developer does not require planning permission.”


The issue

The National Farmers Union had been seeking clarification from HM Revenue and Customs on the use of the DIY self-build scheme for conversions of farm buildings to residential use within new permitted development rights.

The DIY self-build scheme is used to recover VAT on newly constructed residences or conversions of commercial buildings to residential use. However one of the conditions for the use of the scheme is that the taxpayer has obtained planning consent. The application form requires the taxpayer to submit a copy of the planning permission with their claim.

The NFU believed that conversions carried out under new permitted development rights will be carried out within the general planning consent there will clearly be no formal evidence that planning permission has been granted. HM Revenue and Customs initiallysuggested that this may present a problem with the use of the DIY self-build scheme and are currently considering the issue further.

People considering converting a farm building to residential use under the new permitted development rights should take professional advice on the tax implications at an early stage.