TC09672 - [2025] UKFTT 01262 (TC)

Fecha: 20-Oct-2025

The test to be applied

The test to be applied

40.

The relevant requirement under consideration here is that, even if the taxpayer is otherwise entitled to recover input tax, in order to be entitled to input tax recovery it must either hold a VAT invoice or HMRC must exercise its discretion to permit the taxpayer to hold alternative evidence. The relevant provisions are in Regulation 29(1) and (2)):

“29 Claims for input tax
(1)
Subject to paragraph (1A) below, and save as the Commissioners may otherwise allow or direct either generally or specially, a person claiming deduction of input tax under section 25(2) of the Act shall do so on a return made by him for the prescribed accounting period in which the VAT became chargeable save that, where he does not at that time hold the document or invoice required by paragraph (2) below, he shall make his claim on the return for the first prescribed accounting period in which he holds that document or invoice
…
(2)
At the time of claiming deduction of input tax in accordance with paragraph (1) above, a person shall, if the claim is in respect of—
(a)
a supply from another taxable person, hold the document which is required to be provided under regulation 13…
provided that where the Commissioners so direct, either generally or in relation to particular cases or classes of cases, a claimant shall hold or provide such other … evidence of the charge to VAT as the Commissioners may direct.
…”

41.

The VAT invoice must contain the information and otherwise comply with the conditions set out in Regulation 14.

42.

Where the taxpayer does not hold such an invoice then, under Regulation 29(2), HMRC may direct that the taxpayer should hold evidence other than a VAT invoice. If HMRC decline to exercise their discretion then the trader’s input tax claim fails because it has not satisfied the evidential requirements in Regulation 29.

43.

Where a taxpayer challenges HMRC’s exercise of that discretion the test to be applied is set out by the Upper Tribunal in FS Commercial Ltd v R & C Commrs [2025] BVC 502;

[42] The exercise of HMRCʼs discretions under reg.29(2) VATR can only be challenged by the taxpayer on the ground that it was a decision that no reasonable body of Commissioners could have reached. The burden lies on the taxpayer to demonstrate this, based on facts and matters available to HMRC at the time the decision was taken. The jurisdiction is strictly supervisory, not appellate or ‘substitutionary’ (Tower Bridge, [122], Scandico, [43], Kohanzad p.969).

[43] In summary:

(1)

where a taxable person incurs input tax, the right to deduct it arises,

(2)

however, to exercise the right to deduct as of right the taxable person must hold a valid VAT invoice;

(3)

in the absence of a valid VAT invoice, whether the claim to input tax should be permitted is at the discretion of HMRC under reg.29 VATR; and

(4)

the FTTʼs jurisdiction on an appeal against HMRCʼs exercise of its discretion is supervisory only.”

44.

Mr Joseph argued that the test in FS Commercial did not apply on the grounds that the Appellant’s appeal was under section 83(1)(c) and (p) where the Tribunal has full appellate jurisdiction. I disagree, section 83(1)(c) and (p) simply gives the taxpayer the right to appeal against a denial of input tax or the amount of an assessment. Within the VAT legislation there are instances, such as Regulation 29(2) where the issue concerns the exercise of HMRC’s discretion and the Tribunal has a more limited supervisory jurisdiction. Necessarily those circumstances will arise when there has been an appeal under section 83(1)(c) and (p). FS Commercial binds this Tribunal and I will apply it.

45.

It is relevant to note that the test is to be applied based on the evidence held by HMRC at the time, not any further information that might be provided later by the taxpayer.

46.

In considering HMRC’s strike out application therefore and applying the cumulative effect of Fairford and FS Commercial, the test is whether there is a realistic prospect of the Appellant successfully arguing in the full appeal that HMRC, in refusing to accept alternative evidence, reached a decision that no reasonable body of Commissioners could have reached.