‘Noted practice of box breaking on selected vehicles i.e. private individual purchases car with company’s money. Invoice addressed to private individual. Car then passes to company who claim input tax and make onward sale. Checks applied satisfactory. However input tax entitlement re box breaking queried with Policy. Ruling awaited.’
‘Dear Mr Hammon As per our telephone conversation with Mr Wootten the officer from HMRC’s VAT Department, I would like to confirm that if the accounting system of Mercedes Dorchester allowed us to change the invoice details for cars supplied to [Everycar] we would be pleased to do so. However, the Kerridge system does not allow us to do this because the transactions have been archived which means that we are unable to print a replacement invoice with a different name and address. We are fully aware that the supply of these cars has been to Everycar and the deals should have been done in Everycar’s name but were invoiced to private individuals and not in the name of the company. Therefore we are more than happy to provide changes showing the customer as [Everycar]. We also confirm that the cars were paid for by the company. For confirmation, the vehicle registration numbers of the cars referred to above are: [registration numbers given].’
‘We have supplied a number of new cars to Mr Mark Hammon and have invoiced these to various individuals provided to us by Mr Hammon. At the time these cars were sold we were aware that they were being supplied to Mr Hammon for the purpose of his business [Everycar].’
“do the appellants have evidence to show [HMRC’s] decision not to accept alternative evidence [for the deduction of input tax] exceeds the bounds of public law rationality?”
“I can’t say for sure”
‘… the situation here was that the invoices could have been made out by the supplier to [Everycar] but the company had deliberately for business reasons chosen to adopt a practice whereby the invoices were made out to third parties. The suppliers were by my understanding still in existence and the company could have obtained invoices from them had they chosen to. In my view it was therefore not in accordance with HMRC policy regarding alternative evidence to accept the third party invoices as alternative evidence to allow input tax deduction in this situation. In exercising my discretion I also considered the risk of fraud, in that if the third party invoices were to be accepted as alternative evidence, there was a risk to the Exchequer of duplicate claims being made to the input tax, both by [Everycar] and by the person to whom the invoice had been addressed. I considered that this risk of enabling fraud to be committed was a valid reason not to apply [HMRC’s] discretion to accept alternative evidence. I also considered that if [Everycar] were permitted through the application of HMRC’s discretion to claim back input tax on the basis of third party invoices, which they had chosen to use rather than obtaining invoices in their own name, in order to gain business advantage, then HMRC would be acting inequitably towards the many compliant taxpayers who did not engage in such business practices and who might be regarded as being disadvantaged as a consequence. Whilst it was open to me to vary the disputed decision on this basis as a conclusion to my review and accept that satisfactory alternative evidence had been supplied, I did not do so for the above reasons. I exercised my discretion but I decided not to apply the discretion, as it would be contrary to HMRC policy to do so.’
‘If you are a VAT registered business, and you have been issued with an invoice that is invalid, you should be able to return to your supplier and ask them for a valid VAT invoice that complies with the legislation. If for some reason you cannot, this Statement of Practice sets out whether or not you may be entitled to input tax recovery. In most cases, provided businesses continue to undertake normal commercial checks to ensure their supplier and the supplies they receive are ‘ bona fide ’ prior to doing any trade, it is likely they will be able to satisfy HMRC that the input tax is deductible.’
‘19. As long as the claimant can provide satisfactory answers to the questions at Appendix 2 and to any additional questions that may be asked, input tax deduction will be permitted. Appendix 2: Questions⃰ to determine whether there is a right to deduct in the absence of a valid VAT invoice (1) Do you have alternative documentary evidence other than an invoice (e.g. a supplier statement)? (2) Do you have evidence of receipt of a taxable supply on which VAT has been charged? (3) Do you have evidence of payment? (4) Do you have evidence of how the goods/services have been consumed within your business or their onward supply? (5) How did you know that the supplier existed? (6) How was your relationship with the supplier established? For example: · How was contact made? · Do you know where the supplier operates from (have you been there)? · How do you contact them? · How do you know they can supply the goods or services? · If goods, how do you know the goods are not stolen? · How do you return faulty supplies? ⃰This list is not exhaustive and additional questions may be asked in individual circumstances’
‘[t]he problem here is of [the appellants’] own making and the remedy also. The remedy is for [the appellants] to go back to the franchised dealer[s] with evidence of their purchase order[s] for the vehicle[s] and ask them to issue a credit note against the original invoice because it has been made out incorrectly and to have a tax invoice made out in the name of the business. The [appellants] would then be able to reclaim the input tax subject to the statutory time limits and normal conditions.’
‘… Member States must provide for rectifying errors in invoicing VAT, including both rectifying the invoice and reimbursing the tax wrongly paid. [The Commission] submits that that duty flows from the principle of neutrality and from the prohibition of unjust enrichment (here, on the part of the tax authorities). Member States may choose whatever procedure is suitable, provided that the principle of effectiveness is respected. A situation in which normally only the supplier, as person liable for the tax, may seek reimbursement from the tax authorities and the customer must seek reimbursement from the supplier, under civil law, appears in principle acceptable. However, provided that any risk of tax loss is wholly eliminated, the principle of effectiveness might require the customer to be able to claim against the tax authorities if recovery by the normal procedure proved “virtually impossible or excessively difficult”.’
‘… [A]s rightly submitted by the Commission, if reimbursement of the VAT becomes impossible or excessively difficult, in particular in the case of the insolvency of the supplier, those principles [i.e. the principles of neutrality and effectiveness] may require that the recipient of the services to be able to address his application for reimbursement to the tax authorities directly. Thus, the Member States must provide for the instruments and the detailed procedural rules necessary to enable the recipient of services to recover the unduly invoiced tax in order to respect the principle of effectiveness.’
‘The threshold of public law irrationality is notoriously high. It is to be remembered that what may seem fair treatment of one taxpayer may be unfair if other taxpayers similarly placed have been treated differently. And in all save exceptional circumstances the Revenue are the best judge of what is fair.’
‘Article 178: 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 Section 3 to 6 of Chapter 3 of Title XI. Article 180: Member States may authorise a taxable person to make a deduction which he has not made in accordance with Articles 178 and 179. Article 182: Member States shall determine the conditions and detailed rules for applying Articles 180 and 181.’