VAT Tribunal – Input Tax
In this Tribunal case the Chairman examined the denial of an input tax deduction by HMRC. The taxpayer had appealed against an assessment for over £10,000. The case which makes for interesting reading concerns a clothing wholesaler based at the Commercial Road, London. The Appellant had purchased stock from two different men who had been driving down the Commercial Road offering goods to the many clothing wholesalers based there. The taxpayer bought consignments of stock from the two suppliers, paying in cash and taking the clothes in question off the back of the vans. The Appellant was provided with VAT invoices from both suppliers.
However, the input tax claims were rejected by HMRC due to the lack of other evidence that the supplies had been made by the businesses holding the VAT registration numbers. These VAT registration numbers had been valid but both businesses had ceased to submit VAT returns and had been classified as ‘missing traders’ by HMRC.
The Tribunal found for HMRC even though the Appellant appeared in the eyes of the Tribunal not to be acting fraudulently. This case is a timely reminder of the importance of businesses holding proper evidence to deduct input VAT and knowing their suppliers.