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HMRC internal manual

VAT Fraud

Basic interventions: input tax interventions: supporting a claim to input tax: where the VAT invoice held is deemed to be invalid: where the invoice is deemed to be invalid - first principles

Where the invoice used to evidence a claim to input tax is deemed to be invalid you must, in the first instance, request that the taxable person seek to obtain a proper VAT invoice (see VATF42421). If the taxable person will not do so, or cannot evidence that he has done so, you should not exercise the discretion as per VATF42424. This was confirmed in the First Tier Tribunal (‘the Tribunal’) decision in the case of Everycar Contracts Ltd and Sabrina Hammon t/a SJM Group (UKFTT 405 (TC)). In that decision the Tribunal accepted our argument that:

‘… it is fundamental to HMRC’s proper supervision of VAT that taxable persons are required to issue, and to hold, when claiming input tax deductions, regular VAT invoices … there is no apparent reason why the appellants in this appeal should not be able to obtain regular VAT invoices from dealer-suppliers. There is an obligation on them under regulation 13 of the VAT Regulations 1995 to provide a regular VAT invoice to whichever of the appellants was the purchaser of a car in any particular case.’

It also accepted that:

‘[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 o 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.’

If the taxable person can provide evidence that he has attempted to obtain a valid VAT invoice and is unable to do so (for example, because the supplier has gone into liquidation), you should read VATF42424.