Our client has a property development/construction company.
This year they took on a barn conversion site, rather than the new build sites they normally work with. They didn't realise that the construction supplies they were buying should have been reduced rate. One VAT enquiry later, they have been made to pay back all the overclaimed input VAT to HMRC.
The problem I now have is the builders merchants and other suppliers are refusing to reduce rate their supply - As they cannot guarantee what site the materials are used on. I understand their point of view, but it has left our client paying 20% VAT to the supplier and only able to reclaim 5%. And HMRC is £37k better off.
Has anyone come accross this issue? There are DIY homebuilder schemes but they do not apply to developers.