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HMRC internal manual

VAT Fraud

What to consider prior to determining whether to use an intervention: matters to consider when looking at particular types of taxable person or activity: labour providers: regulation 29(2) and alternative evidence

Where a taxable person does not hold a valid tax invoice, HMRC has discretion under VAT Regulation 29(2) to allow input tax deduction where there is alternative evidence which demonstrates the receipt of a taxable supply. Officers must give proper consideration to this discretion in all cases where there is no valid invoice to support an input tax claim.

Therefore, if you decide that the invoice held by the trader is not valid, before making your decision to assess you should give the trader the opportunity to provide alternative evidence to support their input tax deduction.

This evidence can be in any form, but would normally be expected to include commercial records such as timesheets and wage records, which may provide sufficient alternative evidence to allow input tax deduction. You should of course have already considered the availability of this type of evidence when considering the first two questions as explained above, i.e. has a supply been received and was it a taxable supply?

Bear in mind though that Regulation 29(2) relates only to the evidence that a trader must hold to support a claim for input tax. This is a secondary issue, which only becomes relevant if there is no reason to doubt that a taxable supply has been received, hence the need to consider that question first, as explained above.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

If no such evidence is produced, or you are unsure as to whether the evidence produced is sufficient, you should consult the SI Technical Team (for SI cases) or the VAT Fraud Team (who will consult the VAT Deductions & Financial Services team if necessary) for further advice.

VATF36160 looks at the application of the Kittel principle to labour providers.