Input VAT Evidence and HMRC Discretion

It is commonly thought that for input VAT to be reclaimed from HM Revenue and Customs (HMRC), a valid VAT invoice is an absolute prerequisite. However, HMRC are permitted to accept other evidence and, although this is discretionary, they are obliged by their internal procedures to 'balance the need to protect the revenue against the need to ensure that businesses pay no more tax than is properly due from them'.

Whilst a valid VAT invoice to evidence the payment of the VAT is always the preferred proof, there are a number of cases in which the Tax Tribunal has accepted other evidence, such as where invoices have borne the wrong purchaser name due to error, where original invoices were not available but copies could be found and so on.

If a dispute about the validity of a claim does arise, HMRC's decision to disallow the deduction of input tax may be overturned if their discretion was not used in the taxpayer's favour and this was unreasonable.