Recovering input VAT without a VAT invoice

When claiming input VAT on a purchase, a taxpayer is normally expected to retain a qualifying VAT invoice. Without it, HMRC will reject the taxpayer’s claim.

That rejection can be overturned. This is illustrated in the recent case of Xpress Telecom Ltd v Revenue and Customs Commissioners ([2014] UKFTT 1003, published on 20 November 2014).

The taxpayer had till receipts, but no qualifying VAT invoices for its purchases. HMRC had denied the taxpayer’s claims of input VAT. “Runners” had purchased for the taxpayer many £500+ iPhones from Apple retail stores, using their own names to circumvent Apple’s policy of two iPhones per customer. HMRC said the runners’ till receipts were not valid VAT purchase invoices for the taxpayer’s claim and therefore rejected the taxpayer’s claims for input VAT.

The First-tier Tribunal decided the purchases had been made by each runner themselves and not by the taxpayer, with the iPhones being supplied on to the taxpayer by the runner. The Tribunal ruled that for these purchases the taxpayer was not entitled to recover input VAT.

However, this is not the most interesting aspect of the case. It emerged during the case that, before the dispute reached Tribunal, the taxpayer’s professional advisers had already challenged HMRC’s rejection of the taxpayer’s claim with some success. The argument with HMRC had been difficult, as the taxpayer only held till receipts which could not be accepted as full VAT invoices. Eventually HMRC had agreed to accept those till receipts which related to purchases by an employee or director of the taxpayer and to pay the taxpayer’s claim in respect of these purchases.

When a taxpayer suffers input VAT but does not hold a full VAT invoice, it is important to appreciate that HMRC is empowered by Regulation 29 of the VAT Regulations 1995 to accept alternative evidence to justify paying a VAT claim. The argument to persuade HMRC can be protracted and technical, but they must act reasonably when reviewing other credible evidence.

For further information and help with VAT claims where full VAT invoices are not held, please contact the TaxDesk on 0845 4900 509 and ask for Kevin Hall.