Unilateral action

The taxpayer company was a motor dealership. Ford supplied certain models on a ‘dealer sold’ basis under an arrangement that saw the car manufacturer invoicing the taxpayer for full price per unit including VAT. However obligation to pay was deferred until the vehicle was sold.

The dealership was placed into administrative receivership in October 2002 by FCE Bank a finance company in the Ford group. The manufacturer repossessed its cars and issued credit notes and tax invoices in respect of the vehicles sold but not paid for.

The taxpayer claimed a repayment of input tax in respect of the cars but HMRC refused. The taxpayer appealed on the basis the credit notes had not been properly issued and had no effect for VAT.

The appeal travelled through the courts reaching the Court of Appeal which found for the taxpayer. It said that the original...