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

In Petroma the CJEU set out the background as follows:

“12.

During inspections conducted as from 1997, the Belgian tax authority questioned, both as regards direct taxes and VAT, the intercompany invoices and resulting deductions since the 1994 year of assessment, the main reason being that those invoices were incomplete and could not be shown to correspond to actual services. Most of those invoices included an overall amount, with no indication of the unit price or the number of hours worked by the staff of the service-providing companies, thereby making it impossible for the tax authority to determine the exact amount of tax collected.

13.

That tax authority therefore disallowed the deductions made by the companies receiving services on the ground, in particular, of non-compliance with the requirements laid down in Article 5(1)(6) of Royal Decree No 1 and Article 3(1)(1) of Royal Decree No 3 of 10 December 1969 on deductions for the application of VAT.

14.

Subsequently, additional information was provided by those companies but was not accepted by the tax authority as a sufficient basis to allow the deduction of the various VAT amounts. That authority took the view that that information concerned either private contracts for services submitted late, after completion of the tax audits and after communication of the adjustments that that authority intended to make, and therefore of no certain date and not binding on third parties, or invoices that were supplemented after they had been issued, at the stage of the administrative procedure, by handwritten references to the number of hours worked by staff, the hourly rate for work and the nature of the services provided and which, therefore, according to the tax authority, lacked any probative value.”

The first question for reference was set out at [21]:

“By its first question the national court seeks in substance to ascertain whether the provisions of the Sixth Directive must be interpreted as precluding national legislation, such as that at issue in the main proceedings, under which the right to deduct VAT may be refused to taxable persons who are recipients of services and are in possession of invoices which are incomplete, in the case where those invoices are then supplemented by the provision of information seeking to prove the occurrence, nature and amount of the transactions invoiced.”

The CJEU answered that question at [36]:

“…the answer to the first question is that the provisions of the Sixth Directive must be interpreted as not precluding national legislation, such as that at issue in the main proceedings, under which the right to deduct VAT may be refused to taxable persons who are recipients of services and are in possession of invoices which are incomplete, even if those invoices are supplemented by the provision of information seeking to prove the occurrence, nature and amount of the transactions invoiced after such a refusal decision was adopted.”