Unpaid consideration for supplies between related companies

The taxpayer was formed in 2012 to distribute electrical goods to wholesalers and began trading in July 2013. There were two other companies under the same ownership but these had a long trading history and therefore better cash flow. The taxpayer claimed input tax on purchase invoices received from the sister companies after July 2013 because they remained unpaid by the relevant date (VATA 1994 s 26A). The invoices were for supplies of goods and services made to the taxpayer. The relevant date is six months from the invoice date or due payment date whichever happens later.

The taxpayer argued that the invoices were payable within ten years of the date when Premspec started trading so by July 2023. It also emphasised that the sister companies had accounted for output tax on the supplies in question and not claimed bad debt relief so HMRC was not...