Invalid invoices and HMRC’s discretion: Tower Bridge GP Ltd -v- The Commissioners for HM Revenue and Customs [2021] UKUT 30 (TCC)

The Upper Tribunal (Fancourt J and UTJ Herrington) dismissed an appeal by Tower Bridge GP Limited (“the Appellant”) in respect of two issues: (i) whether it was permitted to deduct £5.6M input tax on its supplier’s invalid invoices, and (ii) whether the Revenue (“the Respondents”) unreasonably exercised their discretion when they refused to allow the denial of input tax on those invalid invoices.

Stratex Ltd issued 17 invoices to the Appellant which failed to provide a VAT Registration Number (“VRN”) and the Appellant’s name. The Appellant said that it did not know that Stratex was not registered for VAT. The First-tier Tribunal found this error was the result of an absence of effective checks. The Upper Tribunal reviewed a significant number of authorities before finding that the requirements for a valid VAT invoice are mandatory, subject to the domestic authority’s power to accept other evidence instead of a compliant invoice. It found that a VRN formed an “essential” or “pivotal” role in the functioning of the VAT system. The Upper Tribunal turned to the second issue where it found that alternative evidence of the charge to tax must be construed as extending to evidence establishing the formal requirements of the VAT Regulations. It found a VRN was a fundamental requirement because of its importance to the exercise by the Respondents of their monitoring function, and the absence of the Appellant’s name gave rise to a clear risk of fraud. These risks were reasonable factors to take into account when denying the Appellant’s input tax.

Joshua Carey appeared for HMRC, led by James Puzey (St Philips) and Howard Watkinson (2 Hare Court). 

To read the full judgment, please click here.

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