Not Holding Valid VAT Invoices Cost £470,894

The First-tier Tribunal has dismissed a taxpayer’s appeal against HMRC’s refusal to allow £470,894 of input VAT, providing another important reminder that the right to recover VAT depends not only on genuine business expenditure but also on strict compliance with the documentary requirements contained in the Value Added Tax Act 1994 and the Value Added Tax Regulations 1995 (SI 1995/2518).

An initial decision valued HMRC’s refusal at £12,128 lower, at £458,766. 

The Appellant, Plat UK Ltd, purchased luxury goods from retailers including Harrods, Dior and Louis Vuitton before exporting them to customers in South Korea. HMRC denied the company’s input tax claims because it did not hold compliant VAT invoices when the VAT returns were submitted.

The Tribunal dismissed the taxpayer’s appeal.

A VAT invoice is more than paperwork

The Tribunal relied heavily on the Court of Appeal’s recent judgment in FS Commercial Ltd v Commissioners for His Majesty’s Revenue and Customs [2026] EWCA Civ 29.

At paragraph 52, the Court summarised the importance of VAT invoices:

“The invoice is a pivotal part of the VAT system.”

It continued:

“Its function is to enable tax authorities to ensure that VAT is correctly levied and corrected. For that purpose, it is a form of proof.”

The Court also confirmed that:

“If the relevant invoices are not produced to the tax authorities on request, they may refuse to allow a deduction unless they are given other information which is sufficient to establish entitlement to exercise the right to deduct.”

This principle underpinned the Tribunal’s decision throughout.

The statutory requirement

The documentary requirements are found in Regulation 29 of the Value Added Tax Regulations 1995.

Regulation 29(2) provides:

“at the time of claiming deduction of input tax a person shall hold a document as required under regulation 13“

Regulation 14 of the same Regulations specifies what a valid VAT invoice must contain, including:

“a description sufficient to identify the goods or services supplied.”

The Tribunal emphasised there are only two routes to recovering input VAT:

“There are therefore two ways by which a taxable person can evidence the input tax such as to be able to exercise the right to deduct that input tax.”

Those are:

• holding a compliant VAT invoice when making the VAT return; or
• persuading HMRC to exercise its discretion under Regulation 29(2) to accept alternative evidence.

Retrospective invoices could not repair the claim

After HMRC began its compliance check, the taxpayer obtained more than 100 VAT invoices from Harrods.

Unfortunately for the taxpayer, timing mattered.

The Tribunal found:

“The Harrods Invoices were only obtained later, in January 2024.”

Because the invoices were not held when the VAT returns were submitted, the statutory requirement in Regulation 29 had not been satisfied.

The Tribunal explained that if a taxpayer does not hold a valid VAT invoice when claiming input tax, recovery becomes entirely dependent upon HMRC exercising its discretion under Regulation 29(2).

The Harrods invoices were not compliant

Even if timing had not been fatal, the Tribunal found that the Harrods invoices themselves failed to satisfy the statutory requirements.

It concluded:

“The Harrods Invoices are not compliant VAT invoices, because they lack a sufficient description of the goods as required under reg 14(1)(g).”

The taxpayer argued that the invoices should be read together with Harrods till receipts, relying on Athena Luxe v HMRC [2025] UKFTT 1507 (TC).

The Tribunal respectfully declined to follow that decision, stating:

“We do not agree that it is possible to treat two documents – a purported Harrods invoice and a Harrods till receipt – as a single composite VAT invoice which meets reg.14 requirements.”

Instead, the Tribunal preferred the statutory wording, which repeatedly refers to “a VAT invoice” as a single document.

HMRC’s concerns extended beyond missing descriptions

The Tribunal accepted that HMRC’s concerns were not simply technical.

Evidence suggested purchases had been made by different individuals, Harrods Rewards cards had been used contrary to their commercial terms, and Global Shipping Master UK Ltd had invoiced the taxpayer for buying services.

Officer Carey concluded:

“I am not satisfied there is other evidence which I have been provided with that satisfies me that your claim for input tax should be allowed.”

The Tribunal held that this was a conclusion a reasonable HMRC officer could reach.

HMRC’s discretion was exercised reasonably

The taxpayer argued that HMRC should have exercised its discretion under Regulation 29(2), relying on alternative evidence.

The Tribunal considered the Court of Appeal’s guidance in Tower Bridge GP Ltd v HMRC [2022] EWCA Civ 998, where the Court explained that:

“the primary purpose of HMRC’s discretion under regulation 29” is “to allow defective invoices to be corrected by the subsequent supply of information which ought to have been in the invoices in the first place.” 

Applying that principle, the Tribunal concluded:

“We consider that Officer Carey’s Decision was one which a reasonable body of Commissioners could have reached.”

The Tribunal also rejected allegations that HMRC had acted unfairly by failing to request additional till receipts before issuing its decision.

Practical lessons for businesses

This decision highlights several practical points for VAT-registered businesses:

• Obtain compliant VAT invoices before submitting VAT returns.
• Check invoices contain every requirement prescribed by Regulation 14 of the Value Added Tax Regulations 1995.
• Do not assume retrospective invoices will repair defective VAT claims.
• HMRC’s discretion under Regulation 29 is precisely that: a discretion, not an entitlement.
• Businesses purchasing goods through agents, employees or intermediaries should ensure the VAT documentation accurately reflects the true recipient of the supply.

Conclusion

The Tribunal ultimately concluded:

“For these reasons, the appeal is dismissed.”

The decision reinforces what the Court of Appeal has repeatedly stated in FS Commercial and earlier in Zipvit Ltd v HMRC [2018] EWCA Civ 1515: a VAT invoice is not merely an administrative formality. It is the statutory evidence upon which the right to deduct input tax depends.

For businesses making substantial VAT recovery claims, ensuring that compliant VAT invoices are held before the VAT return is submitted remains one of the simplest ways to avoid an expensive dispute with HMRC.