Recovery of VAT incorrectly treated as zero rated

The taxpayer JBHL entered into a construction contract with Rok to install equipment into a new place of worship for a charity. So Rok was the main contractor and JBHL was the subcontractor. The charity provided Rok with a certificate under VATA 1994 Sch 8 group 5 note (12)(b) stating the building was for charitable use only and the work was zero rated.

Rok gave the certificate to JBHL but that did not entitle the latter’s supplies to be zero rated. This was because the certificate was addressed to Rok and note (12)(a) provides that in effect only the supplies by the main contractor can be zero rated. However JBHL issued invoices to Rok that incorrectly treated the supplies as zero rated. Rok paid these but went into liquidation in November...