Insufficient checks

Input tax claimed on invalid tax invoices

HMRC disallowed £10 063 of input tax claimed by a bakery business on its first VAT return to June 2014. The sum related to fees charged by R for managing the company payroll and by another company F for taking over the contracts of employees.

HMRC refused the claim on the basis that the VAT registration number quoted by F belonged to another business and that R was not VAT registered. The taxpayer said it had carried out verification checks using the Companies House and Europa websites. However HMRC were not satisfied that the business “had taken reasonable steps to ensure the credibility of the supplier given that the identity of the supplier was not obviously apparent from the invoices and R was registered for VAT”.

The First-tier Tribunal noted the problems faced by small businesses in dealing with...