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A tribunal case in which HMRC disallowed input tax on advance payments even though the supplier had issued tax invoices.
KEY POINTS
- Input tax was disallowed because there was no supply.
- Previous cases have supported the tribunal’s decision.
- Fraud was not in point.
- Possible claim on the basis the project was aborted.
Caveat emptor – these are the only words of Latin I remember from my days of studying economics at school. They mean: let the buyer beware. The English version of the phrase was quoted in a recent First-tier Tribunal decision D & J Grant(TC5195) which provided some important lessons and unfortunately had a bad VAT outcome for the taxpayer.
The appeal concerned a farming business that ordered machinery from a UK supplier. It paid 70% of the cost of the equipment in advance of delivery (plus VAT) but the supplier went into liquidation before the goods arrived. Even though...
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