No supporting invoices

Best judgment in raising assessments to disallow input tax

The taxpayer was a design consultancy. It submitted repayment VAT returns but HMRC’s efforts to carry out a compliance visit were not successful. The company also failed to provide copy purchase invoices to support claims for input tax. Only two payment returns were submitted for the quarters between December 2010 and December 2014 for small amounts of £11 and £27.

The officer raised ‘best judgment’ assessments to disallow all input tax claimed for the periods although a credit was given for output tax declared on returns up to June 2012 because the officer concluded that the company was not trading.

The First-tier Tribunal said this was a ‘fundamental error’ because evidence of trading had been shown by corporation tax returns submitted up to the years ending 31 March 2014. The judge also decided that it was wrong for HMRC to disallow...