Upper Tribunal Tax and Chancery Chamber

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

Fecha: 22-Oct-2024

Relevant case law

Relevant case law

37.

Possession of a valid VAT invoice which contains the specified particulars is a necessary pre-condition to exercise the right to deduct. This is established by numerous authorities, conveniently summarised in Tower Bridge GP v HMRC [2022] EWCA Civ 998, [2022] STC 1324 (“Tower Bridge”).

38.

The effect of Reg. 29(2) VATR is that HMRC has a discretion to allow a credit for input tax notwithstanding that the taxable person does not have a valid VAT invoice (Kohanzad p.969 per Schiemann, J.).

39.

There are two exercises of discretion embedded within Reg. 29(2) VATR: the first is whether to entertain an application to establish the right to deduct otherwise than by a compliant invoice, the second, if the first discretion is exercised in the taxable person’s favour, is the discretion to specify the evidence that HMRC require in order to prove that the input tax has been incurred (Tower Bridge, [123]).

40.

The primary purpose of HMRC’s discretion under Reg.29(2) VATR is to allow defective invoices to be corrected by the subsequent supply of information which ought to have been in the invoices in the first place but was not (Tower Bridge, [125]).

41.

In relation to the discretion, HMRC are being asked to make an exception to the general rule that the right to deduct cannot be exercised without a valid VAT invoice and it is therefore for the taxable person to demonstrate why an exception should be made (Tower Bridge, [126]).

42.

The exercise of HMRC’s 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 FTT’s jurisdiction on an appeal against HMRC’s exercise of its discretion is supervisory only.