To recover VAT on purchases, taxpayers are asked to hold a valid VAT invoice. But what if the taxpayer doesn’t have a valid VAT invoice?
On 21 December 2016, the Court of Appeal answered that question and others in the case of G B Housley Ltd v Revenue and Customs Commissioners  EWCA Civ 1299.
The taxpayer had operated a self-billing arrangement and claimed input tax relying on those self-generated VAT invoices in accordance with HMRC’s Notice 700, Paragraphs 10.6 and 19. HMRC considered that the self-billing arrangement was invalid. Not only were some of the suppliers not registered for VAT and were not at the addresses stated on the self-billing invoices, but the taxpayer had also failed to notify HMRC that it would be operating a self-billing arrangement. HMRC issued assessments.
The Court of Appeal ruled that these assessments were flawed on the grounds that HMRC had not considered whether the claims made by the taxpayer were supported by evidence other than a valid VAT invoice.
This is an interesting decision. It highlights that taxpayers who wish to operate a self-billing arrangement are required to notify HMRC, but the more interesting part is the emphasis that the court has put on alternative evidence to justify the claim of input tax by taxpayers. The decision implies that HMRC are required to consider such alternative evidence before they can issue a valid assessment. This opens up a fresh defence for taxpayers against HMRC assessments.
For example, if a taxpayer has made a claim but, during a VAT inspection by HMRC, some of the purchase invoices are found not to be fully compliant, HMRC will routinely issue an assessment to claw back the input tax. In such circumstances, the taxpayer should not simply accept the assessment but can consider what alternative evidence exists.
For further information and assistance in claiming VAT on purchases without valid VAT invoices, please contact the TaxDesk on 0845 4900 509 and ask for Vaughn Chown.