See Section 16.8
16.8.1 What to do if you hold an invalid VAT invoice
Valid VAT invoices provide evidence for claiming input tax. An invalid invoice is one which falls short of any of the requirements set out in paragraphs 16.3 or 16.6. If you hold an invalid invoice the first thing you must do is go back to your supplier and request an invoice which meets these requirements. If you cannot do this, and can evidence why, you’ll need to satisfy HMRC that the following conditions have been met:
- there’s actually been a supply of goods or services
- that supply takes place in the UK
- it’s taxable at the standard rate or reduced rate of VAT
- the supplier is a taxable person, that’s someone either registered for VAT in the UK, or required to be registered
- the supply is made to the person claiming the input tax
- the recipient is a taxable person at the time the VAT was incurred
- the recipient intends to use the goods or services for business purposes
You must also hold other evidence to show that the supply or transaction occurred.
16.8.2 When and how HMRC will exercise its discretion
HMRC’s discretion to allow a claim for input tax can only be used when there’s sufficient evidence to satisfy HMRC that a supply has taken place (see paragraph 16.8.1).
Where it’s satisfied that the business has taken reasonable steps to comply with the legislation, and that the supply has taken place, HMRC may consider exercising its discretion. But, where a business has systematically failed to obtain a valid VAT invoice HMRC will not consider exercising its discretion.
Where a supply has taken place, but the invoice to support this is invalid, HMRC may exercise its discretion and allow a claim for input tax. But this will depend on the evidence held to show that the supply or transaction occurred and that the supply has been made to the person claiming the input tax.
16.8.3 What evidence you’ll need to be provide
Your evidence should show that a supply occurred on which VAT was charged. There’s no prescriptive list of the type of evidence required, as circumstances will vary. Suitable evidence might include:
- bank statements clearly showing payment of the supply to the supplier
- purchase orders
- evidence of how you identified your supplier and your negotiations with them
- contracts between you and your supplier
- documents evidencing the transportation, storage or insurance of the goods
- any other documents that show a supply took place between you and your supplier
This list is not exhaustive.