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That’s not a proper VAT invoice!

16th Jul 2021
VAT Consultant vatadvice.org
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One basic principle of VAT is that you are required to hold a VAT invoice in order to claim input tax.  VAT Regulation 14 explains the information required.

But real life is not so neat and tidy. Some suppliers do not provide an invoice in the correct format. They leave out crucial information, meaning the document is invalid. Others go out of business before providing the invoice.

So, what does the recipient do? Can he claim VAT anyway?

VAT Regulation 29 includes the words; “… save as the Commissioners may otherwise allow..”  Regulation 29(2) continues; “a claimant shall hold such other evidence of the charge to VAT as the Commissioners may direct.” Or, put simply, HMRC can allow input tax even though an invoice is not available.

HMRC’s discretion to allow input tax is explained in Notice 700, section 16.8, ‘Invalid Invoice Procedure.’

Of course, on some occasions, HMRC decide not to exercise their discretion in the taxpayer’s favour.

So, what can the taxpayer do then? The loss of input tax may be substantial.

The next step is to seek an internal review. Assuming the review upholds the original decision, the taxpayer then has to appeal to the Tax Tribunal. How he approaches this is very important.

The Grounds of an Appeal should state that HMRC have acted unreasonably in refusing to exercise their discretion in the taxpayer’s favour. It is not enough simply to disagree with their decision. The taxpayer then has to provide evidence and explanation to the Tribunal to demonstrate that HMRC have not been reasonable.

There is lots of case law on the point. A good place to start is the 2011 FTT decision in London Wiper Company Limited: www.bailii.org/uk/cases/UKFTT/TC/2011/TC01298.html

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By Hugo Fair
28th Jul 2021 10:43

Given that (almost) everyone knows the fundamental principle ("that you are required to hold a VAT invoice in order to claim input tax") ... it would have been useful to highlight other key requirements (like showing the supplier's VAT no and being issued to the company wishing to claim the input tax).
I may be out-of-date, but these were the 3 'quick win' areas for inspectors many years ago.
Nevertheless a useful reminder that there is (or rather may be) a way out even when your paperwork doesn't stack up as it should!

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