Readers’ forum: Unhappy visit

One of my property developer clients has a major VAT problem following a recent visit from HMRC. A building contractor charged him £900 000 plus 20% VAT on a residential project that apparently qualified for zero-rating.

The officer disallowed £180 000 of input tax on the basis that it can only be claimed on correctly charged VAT. The officer told my client to obtain a VAT credit from the supplier.

However the contractor went into liquidation in 2017 – the invoice in question was raised in 2016. Is there any way around this problem?

The EU principal of VAT not being a cost to a business that only makes taxable supplies seems to be an issue here and it is very unfair that my client has paid this VAT in good faith based on a proper tax invoice but is now being...