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Construction Company wins VAT appeal over information on invoices

Fount Construction Ltd has won an appeal against HMRC on the grounds that limited information on invoices was not a reason for HMRC to reject their VAT claim.

Three invoices in question were from building contractor Landcore Ltd where the total input VAT amounted to £15,218.59.

HMRC argued that the invoices did not include a sufficient description of the building work and were therefore not legitimate as they did not meet the requirements of relevant VAT legislation.

The invoices each contained the description ‘building works at the above’.

VAT was calculated at the standard rate and the invoices included a VAT-exclusive subtotal, the VAT amount, and the overall total.

 

What did HMRC argue?

HMRC argued that the invoices were not legitimate as they did not meet the requirements set out in regulation 14(1), paragraphs (g) and (h), of the Value Added Tax Regulations 1995 which are:

  • 14(1) paragraph (g) –  invoices must contain ‘a description sufficient to identify the goods or services supplied’
  • 14(1) paragraph (h) –  for each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency

HMRC argued that they needed to be able to verify that the details on the invoices were correct, that the VAT had a business purpose and was charged at the correct rate.

In HMRC’s view the description ‘was insufficient as it did not allow HMRC to assess the liability or determine the rate of VAT due’.

 

What did Fount Construction argue?

Fount argued that an invoice can have a simple description and ‘did not need a novel’ in order for it to be valid.

 

The outcome was good news for Fount

The tribunal judge found in Fount’s favour, stating:

‘We do not agree with HMRC’s suggestion that the invoice description needs to be in such detail as to enable HMRC to draw definitive views on the VAT treatment of the supply from the invoice alone.

‘HMRC have wide-ranging powers to seek further information in relation to the supply, and to refuse recovery of input tax if such information is not supplied.

‘The invoice is the gateway into any enquiries by HMRC, rather than a repository for the answers to any questions that might be asked.

‘We conclude that a general short description of the nature of the services (such as ‘building services’), along with some further identifying information such as the name of the site, the contract, or the date of works, will be sufficient to meet the requirements of regulation 14.’

 

Worth reminding yourselves what should be included on a VAT invoice

Whilst the judge clearly showed common sense in this case, is it worth reminding yourselves what does need to be included on a VAT invoice, so you limit the chances of you having to wrangle with HMRC as Fount did.

You must show the following details on any VAT invoices you issue:

  • a sequential number based on one or more series which uniquely identifies the document
  • the time of the supply
  • the date of issue of the document (where different to the time of supply)
  • the name, address and VAT registration number of the supplier
  • the name and address of the person to whom the goods or services are supplied
  • a description sufficient to identify the goods or services supplied
  • for each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency
  • the gross total amount payable, excluding VAT, expressed in any currency
  • the rate of any cash discount offered
  • the total amount of VAT chargeable, expressed in sterling
  • the unit price

 

If you need our help in any aspect of VAT get in touch with our indirect tax partner Paul Hammond at paul.hammond@cowgills.co.uk

 

Disclaimer

The information was correct at time of publishing but may now be out of date.

Tax
Posted by Paul Hammond
5th June, 2024
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