TC09666 - [2025] UKFTT 01253 (TC)

The compliance check run by Ms Brickell ran between June 2023 and June 2024. As part of the check, the Appellant was asked by HMRC to complete a questionnaire about its business activities and to provide information including bank statements, purchase/sale ledgers and copies of invoices. On a number of occasions HMRC considered the information provided to be insufficient and made further requests.

Once Ms Brickell had finished her enquiries she issued her decision letter of 3 June 2024. The decision letter sets out the reasons for rejecting the Appellant’s input tax claim. The letter starts out in general terms by advising that “As a result of our checks, we believe there are inaccuracies in this VAT Return...” but the body of the letter focuses on the BHNV Invoice and the Colridge Invoice and their non-compliance with Regulation 14(1). Under the heading “Alternative evidence” there is a discussion of Ms Brickell’s concerns about the nature of the services and the wider property arrangements, and the letter quoted Regulation 14(1). Ms Brickell’s conclusions in the letter were;

“Alternative evidence

Regulation 29(2) to the Value Added Tax Regulations 1995 (SI 1995/2518) gives HMRC discretion to allow claims for input tax where alternative evidence has been produced.

After considering the further information provided by Mr Silver, I have been unable to identify any material evidence to substantiate or corroborate the supply of services, set out on the disputed invoices, issued by Colridge and BHNV to Eurocent (Buckingham Ltd).

Conclusion regarding input tax denial

VAT is a transaction-based tax. Input tax is deductible in so far as it is incurred on supplies that are cost components of transactions which carry the right to deduct associated input tax.

To address the deficiencies in your supplier invoices, I have attempted on several occasions to obtain further evidence to support your claim by requesting documentary evidence, such as email exchanges or documents evidencing the interactions between you and your suppliers and the timing of the supply of services. No documents have been produced relating to services provided by either Colridge or BHNV.

I have therefore found it impossible to determine exactly when, where or by whom the services were supplied, and whether they were supplied to the taxable person claiming the input tax.

As the Buckingham property was sourced by Barry Glass, at the time of incorporating Eurocent (Buckingham) Ltd in April 2022, it follows that the property could not be introduced to the company for a second time prior to completion of the purchase in October 2022.

After completion of due diligence work and exchange of contracts, the property deal was transferred to Rivka Dreyfuss, as nominee shareholder, via the acquisition of the company’s issued share capital on 10 August 2022. On the same date, Jacob Dreyfuss became the sole director and took over the day-to-day control of the business.

I have therefore concluded, in the absence of alternative evidence, that fees and commissions relating to the introduction and presentation of a viable property deal were incurred by non-taxable person(s) in furtherance of an exempt supply (transfer of shares). Input tax incurred by non-taxable person(s) is not deductible.

I have therefore been unable to exercise my discretion under Regulation 29(2) of the Value Added Tax Regulations 1995 (SI 1995/2518) to allow the input tax deduction.”

Ms Brickell confirmed in the hearing in response to a specific question that her decision was reached under HMRC’s powers under Regulation 29(2) and expressly stated that it was not in the exercise of more general powers.

On 30 August 2024 HMRC upheld Ms Brickell’s decision letter. That review outcome letter quoted section 24(6)(a), Regulation 13(1) and Regulation 14(1) and set out the points in issue (omitting the now agreed output tax issue):

“Points at issue

The points at issue are:

• Whether satisfactory alternative evidence under Regulation 29(2) of the VAT Regulations 1995 has been provided in respect of invoices from Colridge Ltd (Colridge) and BHNV Developments Ltd (BHNV)…”

The review letter reviewed the reasons why the two invoices did not comply with Regulation 14(1) and the exercise of HMRC’s discretion under Regulation 29(2) and concluded as follows:

“Conclusion

The decisions are upheld.

Satisfactory alternative evidence under Regulation 29(2) of the VAT Regulations 1995 has not been provided in respect of invoices from Colridge and BHNV. As such, Officer Brickell’s decision to deny VAT credit on these invoices is appropriate.”

HMRC summarised in their Statement of Case the issues in the appeal as follows (again omitting the output tax issue):

“POINT AT ISSUE

29.

Whether the invoices from BHNV Ltd and Colridge Ltd were invalid for VAT purposes and;

30.

Whether HMRC was correct to refuse to exercise its discretion in the Appellant’s favour to accept alternative evidence.”

The Statement of Case considered in respect of each of the BHNV and Colridge Invoices first whether the invoice was valid, that is whether it met the conditions in Regulation 14, and then the exercise of HMRC’s discretion to accept alternative evidence under Regulation 29(2) referencing decisions including C & E Commrs v Peachtree Enterprises Ltd [1994] BVC 209GB Housley Ltd v R & C Commrs [2017] BVC 4.

The Statement of Case concluded:

“38.

For the reasons given above HMRC respectfully request that the Tribunal find that

a)

the decision to disallow the input tax on the invoices in dispute is correct;

b)

The assessment was made to best judgement.

c)

The assessment is in time”