UT (Tax & Chancery) UT/2023/00099 - [2025] UKUT 00013 (TCC)

The European source of VAT legislation is the Principal VAT Directive 2006/112/EC (“PVD”). Under Article 2(1), supplies of goods and services by a taxable person acting as such are chargeable to VAT.

A supplier charges “output tax” on the supplies it makes and can then deduct the “input tax” on the supplies it receives under Articles 167-168; other Articles govern how the right to deduct is to be exercised.

Article 178 provides:

“In order to exercise the right of deduction, a taxable person must meet the following conditions:

(a)

for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Articles 220 to 236 and Articles 238, 239 and 240; …”

Article 180 provides that Member States may authorise a taxable person to make a deduction which he has not made in accordance with e.g. Article 178, and under Article 182 Member States are to determine the conditions and detailed rules for applying Article 180.

Chapter 3 of the PVD sets down the invoicing requirements for the VAT system. Article 220 requires that a taxable person making a taxable supply must (subject to specific exceptions) ensure that an invoice is issued in respect of it. Article 226 then sets out the mandatory contents of invoices issued pursuant to Article 220. Under Article 242 every taxable person “shall keep accounts in sufficient detail for VAT to be applied and its application checked by the tax authorities”.