When a client tells me their builder has gone into administration, I used to ask about retention and unpaid applications. Now I ask something else: did anyone check the VAT was right?
If it wasn't, and the contractor has already failed, a decision released on 2 October shows how little the Tax Tribunal can do.
TL;DR: If a supplier charges you VAT that was never due, only the supplier can reclaim it from HMRC. Section 80 VATA 1994 is the exclusive route and it belongs to them. When the supplier fails before refunding you, the First-tier Tribunal has no jurisdiction to hear your claim.
What actually happened here?
A further education college appointed a construction company as principal contractor in June 2022. The contractor charged standard-rate VAT and paid it over to HMRC. Around eighteen months later the college asked HMRC for a view, and HMRC confirmed the work should have been zero-rated.
The contractor agreed to refund the VAT, then entered administration without paying any of it. The college asked HMRC directly in May 2024. HMRC refused, and the college appealed (Education Training Collective v HMRC [2026] UKFTT 1381 (TC), 2026).
These are not exotic facts. Construction accounted for 3,866 company insolvencies in the 12 months to August 2026, more than any other sector (Insolvency Service, 2026).
Why couldn't the tribunal just fix it?
Because the forum killed the claim, not the merits. Judge Dr Christopher Staker KC struck the appeal out under rule 8(2)(a) for want of jurisdiction, never reaching whether the college was right.
Section 80 gives the repayment claim to whoever accounted for the VAT, which is the supplier. Section 80(7) blocks everything else: except as provided by that section, HMRC "shall not be liable to credit or repay any amount" paid to them as VAT that was not due (VATA 1994 s80). No valid section 80 claim means no appealable decision, so nothing to hear. The judge held he was bound by Earlsferry Thistle Golf Club [2014] UKUT 250 (TCC).
That is the part worth sitting with. We argue about whether a supply was zero-rated. The tribunal asked a prior question, and the answer ended the case. Procedure decides more tax appeals than merits do.
What I would change on a construction job
Two things, both before anyone invoices.
Get the VAT treatment confirmed in writing before the first application for payment. On zero-rated work the rules are fiddly enough to get wrong honestly: new dwellings, relevant residential purpose, relevant charitable purpose, conversions. Where a certificate is needed, Notice 708 requires the customer to give it to the contractor before the supply is made (VAT Notice 708). The college asked the right question eighteen months too late.
Then the contract. If the VAT position is arguable it needs a VAT adjustment and indemnity clause, and where a supplier has agreed to refund you chase it that week. What I see most often is the opposite: an agreed refund treated as settled, nobody diarising it. Section 80 also carries a four-year window from the relevant date, so even a solvent supplier runs out of road.
Is the money actually gone?
Not necessarily, and the judge was careful not to say it was. At paragraph 43 he expressly declined to say whether a Reemtsma claim can still be brought against HMRC in ordinary civil proceedings since 31 December 2020, pointing to METATRON. The principle comes from Case C-35/05 (CJEU, 2007): a purchaser may claim directly from the tax authority where recovery from the supplier is impossible or excessively difficult.
So the honest reading is narrower than "you lose". The cheap, specialist forum is shut; what may survive is an unsettled restitution claim in the High Court. For a college with counsel instructed, that is a commercial decision. For an owner-managed company arguing over a five-figure sum, High Court litigation and "gone" are the same sentence.
Frequently Asked Questions
My supplier charged me VAT it should not have. Can I claim it back from HMRC directly?
Not through the Tax Tribunal. Section 80 VATA 1994 gives the repayment claim to whoever accounted for the VAT, which is your supplier. Ask them for a credit note and a refund. If they refuse, your claim is against them in contract, not HMRC.
What is a Reemtsma claim, and does it still work in the UK?
The EU-law principle that a purchaser can go directly to the tax authority where recovering from the supplier is impossible or excessively difficult. After this decision it does not get you into the Tax Tribunal. Whether it survives as a High Court civil claim after 31 December 2020 is unresolved; the judge deliberately left it open.
Our contractor went into administration owing us the VAT. What can we do now?
Prove in the administration as an unsecured creditor, which usually returns little. Check whether any adjustment or indemnity clause in the contract bites. Then take advice on whether a High Court restitution claim is proportionate. Do all three in parallel, because the four-year section 80 clock does not stop while you think.
If you have a construction project running and nobody has confirmed the VAT treatment in writing, that is worth half an hour now, not after the contractor files a notice of intention. Get in touch and I will go through the contract.