Tower Bridge GP Ltd – CoA judgment – refusal of input tax recovery on carbon credit transactions

The taxpayer is the representative member of the Cantor Fitzgerald Group VAT group. A group member, CFE, began trading in carbon credit transactions. Between 18 May 2009 and 3 June 2009, CFE purchased carbon credits in 17 separate transactions for its own taxable business, the onward (taxable) supply of carbon credits. HMRC denied recovery on the basis that:

1. they were not valid invoices – they did not show the customer’s name (i.e. CFE) and the supplier was not registered for VAT (and never subsequently registered and accounted for the VAT);
2. the transactions were connected to fraud; and
3. that Tower Bridge failed to conduct reasonable due diligence in relation to the transactions.

Source KPMG