No recovery because invoices were not valid

The taxpayer was the representative member of the Cantor Fitzgerald Group VAT group. Another group member (C) traded in carbon credit transactions. Between May and June 2009 C purchased carbon credits from another company (S) but it later transpired that S was a fraudulent trader was not VAT registered and did not account for output tax on the transactions.

HMRC refused the taxpayer’s claim for input tax on the basis that the invoices were not valid because they did not contain the supplier’s VAT number.

The First-tier Tribunal and Upper Tribunal dismissed the taxpayer’s appeal.

The Court of Appeal reviewed the extensive EU case law and concluded that VAT recovery based on invalid invoices was permissible only when a valid VAT invoice was subsequently produced. In this case the supplier never registered for VAT so the taxpayer had no right to recover VAT based on the invalid invoices....