VAT at a stroke

I have a client who has encountered a major problem with a VAT claim under the DIY scheme.

The basic problem is that my client has built himself an impressive new house to live in which includes a luxurious indoor swimming pool. My client was charged VAT for the work carried out by the builder in installing the swimming pool — the builder stated that this particular work was standard rated as a luxury item. My client was not too concerned about being charged VAT because he knew that VAT recovery was possible through the DIY scheme.

However HMRC has since rejected the part of the DIY claim relevant to the swimming pool on the basis that the work in question should have been zero rated. I feel this is unreasonable because my client has paid VAT in good faith to the builder and the work is...