AC-2023-LON-000068 - [2025] EWHC 2312 (Admin)

The issue in this case is whether the Claimant, who was established in 1974, a wholesale supplier of hotel rooms, is entitled to deduct input tax on a series of supplies which were the subject of two Error Correction Notices (“ECNs”) submitted to HMRC but refused by a Decision Letter dated 9 May 2023. The ECNs were dated 3 September 2021 for VAT periods March 2020 – June 2021 (in the amended sum of £416,977.11), and 25 January 2023 for VAT periods July 2021 – November 2022 (in the amended sum of £9,768,327.58). Two earlier ECNs were honoured by HMRC and the Claimant says the second two ECNs, based upon evidence of the same sort as the first two, ought to be paid in the same way; that is to say, they argue, consistently with HMRC’s published policy.

It is the Claimant’s case that they are entitled to a mandatory order that HMRC must follow their Guidance contained inter alia in a document known as VIT31200 from HMRC’s Manual, and the relevant Statement of Practice ‘VAT Strategy: Input Tax deduction without a valid VAT invoice’. There is also a passage in Notice 700 with the heading “Guidance VAT guide (VAT Notice 700) The guide to VAT rules and procedures” headed “16.8 Invalid invoice procedure with two sections:16.8.1 What to do if you hold an invalid VAT invoice” and “16.8.2 When and how HMRC will exercise its discretion.” Each of these supports the proposition that in the present circumstances input tax deduction should have been allowed they argue. Alternatively, HMRC is they say to respect the Claimant’s legitimate expectation by repaying to the Claimant the input tax claimed in the third and fourth ECNs.

To understand the context of the decision-making requires the setting out of a fairly substantial body of written material.