A subcontractor was held liable to account for VAT when building work had wrongly been zero-rated and the contractor had gone into liquidation.
The main contractor’s supply for a construction project was zero-rated because the end customer was a charity.
A subcontractor incorrectly treated its services to the contractor as zero-rated.
By the time this was realised, the contractor had gone into liquidation. Had the contractor not gone into liquidation, the subcontractor could have charged VAT and the contractor could have claimed it back as input tax.
The subcontractor appealed on two grounds:
- no VAT was lost because the contractor could have claimed back any VAT the subcontractor charged
- HMRC should exercise discretion not to assess the VAT.
The first tier tribunal had found against the subcontractor on both grounds. There were no new grounds for the upper tribunal to consider.
The amount of VAT claimed was £221,000.
J B Hopkins Ltd [2018] UKUT 0382 [18.12]