HMRC Invalid invoice guidance
VAT Regulation 29 empowers HMRC to allow an input tax claim where the recipient of the supply does not hold a valid VAT invoice. This is helpful as sometimes the document provided fails to satisfy the criteria for a VAT invoice. As I understand the position, HMRC have discretion to accept a deficient invoice as a VAT invoice and they also have discretion to accept alternative evidence of the supply.
For some years, HMRC operated to a Statement of Practice dated March 2007. This document is confusing as it tries to address the problem of input tax claims within the context of fraudulent transactions as well as day-to-day claims in more genuine situations.
Thankfully, HMRC have now updated Notice 700 with clearer guidance, which reflects the relevant elements of the Statement of Practice. This is found in the invalid invoice section of Notice 700, in paras 16.8.
The first question is then to establish that the recipient has the right to claim input tax. So, can he establish that a supply has taken place, etc. The full list of questions to be answered is in para 16.8.1:
- there’s actually been a supply of goods or services
- that supply takes place in the UK
- it’s taxable at the standard rate or reduced rate of VAT
- the supplier is a taxable person, that’s someone either registered for VAT in the UK, or required to be registered
- the supply is made to the person claiming the input tax
- the recipient is a taxable person at the time the VAT was incurred
- the recipient intends to use the goods or services for business purposes
Having established eligibility to claim input tax the second question concerns the evidence to be produced in lieu of a proper VAT invoice. That will be mainly electronic documents although it may include hard copies. This is where the reviewing HMRC Officer will weigh the evidence that is provided. Para 16.8.3 lists the sort of evidence which HMRC expect to see. The list is not intended to be exhaustive, so do provide more if you can:
- bank statements clearly showing payment of the supply to the supplier
- purchase orders
- evidence of how you identified your supplier and your negotiations with them
- contracts between you and your supplier
- documents evidencing the transportation, storage or insurance of the goods
- any other documents that show a supply took place between you and your supplier
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Hi, I am a VAT Consultant, part of the team at vatadvice.org We are based in Cambridgeshire. We work largely with charities but also advise a range of commercial organisations.
I have over 30 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.