TC09603 - [2025] UKFTT 00931 (TC)

There are three other decisions which are of particular relevance in the context of the present application. These are:

In Earlsferry, the Respondents had refused a claim made by the recipient of supplies for the repayment of VAT wrongly paid to the Respondents by its supplier. It did so on the basis that the supplier, as the person who had wrongly paid the VAT, was the only person who could obtain a repayment of the VAT. The recipient’s appeal against that decision under Section 83(1)(b) of the VATA was struck out by the UT on the basis that the FTT had no jurisdiction to entertain the appeal. The UT held that the Respondents had made no decision as to whether the supplies in question were exempt or taxable but had instead based their refusal on the entirely different ground that the claim should have been made by the supplier and not the recipient.

Scandico was a decision of the UT following the disallowance by the Respondents of a claim to VAT input tax by the appellant which was not supported by VAT invoices. The FTT, following long–established practice, and with the agreement of both parties, approached the issue in two stages. It first considered whether there had been taxable supplies to the appellant and it then went on to consider, as a second stage, whether the Respondents’ refusal to accept evidence other than VAT invoices had been reasonable – see Scandico at paragraph [22]. The UT held that this approach had been incorrect because the role of the FTT “is to examine a decision that [the Respondents] have taken and decide whether that decision was right or wrong” (see Scandico at paragraph [39]). In Scandico, the proper construction of the letters setting out the Respondents’ decision was that the Respondents had made no decision as to whether there had been taxable supplies to the appellant. The Respondents had merely decided that there was not enough information provided by the appellant to justify a direction under Regulation 29(2) to the effect that the alternative evidence provided by the appellant in the absence of VAT invoices was sufficient evidence of the supplies and it was that decision which the FTT had to address. Accordingly, the UT declined to express any view on whether there had been taxable supplies to the appellant in that case and confined its decision to the question of whether the Respondents had acted reasonably in refusing to exercise its discretion to allow the alternative evidence to suffice. It went on to hold that, in that case, the FTT had correctly concluded that the Respondents’ decision had been reasonable – see Scandico at paragraphs [44], [60] and [61].

In Zipvit, following a reference which it had made to Court of Justice of the European Union (the “CJEU”), the SC addressed the question of whether the appellant, which had entered into contracts with its supplier on terms that it was obliged to pay an additional amount equal to the VAT on the supplies in the event that they were taxable, was entitled to claim a deduction for those amounts in circumstances where:

The SC held that, in those circumstances, no amounts in respect of VAT had been “due or paid”, with the result that no claim to deduct VAT input tax arose – see Zipvit at paragraphs [27] to [31]. In the light of that conclusion, the SC declined to decide the question of whether the appellant’s claim to deduct VAT input tax would have been barred in any event because it had received no VAT invoices and, had the Respondents considered the exercise of their discretion under Regulation 29(2), they would have been bound to conclude that the deduction should not be allowed – see Zipvit at paragraphs [32] to [36].