Do you need original paper VAT receipts to claim back VAT?
- Paul Clifton
- a few seconds ago
- 7 min read
Introduction
Businesses often ask if they can claim input VAT without a VAT invoice. The common misconception is that VAT cannot be recovered without an original paper receipt.
To successfully claim input tax, businesses must ensure they hold appropriate evidence to support their claim. A failure to do so can result in HMRC disputing the claim, even where the underlying transaction is genuine. However, other forms of documentation may also be acceptable, depending on the nature of the supply.
The easiest way to demonstrate input VAT recovery is by holding a valid VAT invoice. This can be in electronic format e.g. as a downloaded PDF file.
Sometimes all you have is an item on a bank or credit card statement. This is when the alternative evidence we are forced to rely on can get stretched to breaking point.
This often happens with online orders, where the business fails to print or save the receipt, or when they buy goods on a card in-store rather than using their account and then lose the receipt.
If it's a regular supplier with a known VAT number and the goods purchased couldn't have been for anything other than the business, then often businesses would claim the input VAT, although HMRC may argue the evidence is insufficient if they ever found out.
Basic evidence to claim input tax
The primary requirement under UK VAT law is that the claimant must hold ‘such documents or other information’ as the (HMRC) Commissioners may specify or direct.
You must have evidence of VAT paid on purchases. Usually this will be the original invoice or VAT receipt from the employee or contractor. This must identify both the supplier and the customer, describe the goods or services supplied, and meet all the standard invoice content rules. HMRC may disallow a VAT reclaim if the invoice is made out to someone other than the VAT-registered business claiming the input tax. However, there are exceptions, e.g. for expenses such as subsistence or motoring costs incurred by employees on behalf of the business. See below.
The main document needed to claim input tax is a VAT invoice that complies with the legislation concerning the contents of a VAT invoice (VAT Regulations: SI 1995/2518, Reg 14).
Valid invoice
A valid invoice should include all of the following information:
Name, address and VAT registration number of the supplier,
The name and address of the customer, along with a description of the goods or services being supplied,
A unique sequential identifying number,
A date of supply (the tax point date). This will be the date when the customer can claim input tax unless they use the cash accounting scheme, in which case the payment date becomes relevant.
The amount chargeable before VAT together with a separate amount for the VAT.
Small purchases
If the total value is less than £250, then a less detailed tax invoice can be issued (VAT Notice 700, para 16.6). For even smaller purchases under £25, no VAT invoice is required at all in specific situations e.g. public phone calls, coin-operated machines, car park charges, or tolls paid at a tollbooth.
Employee paying for business costs
You should also look at who paid the supplier and the reason for the payment. This can be applicable if an employee incurs a cost on behalf of their employer’s business. While it is always best to obtain a VAT invoice addressed to the business, HMRC do not insist on this for say, hotel costs and employee business travel and subsidence.
It doesn’t usually matter who originally paid for the supplies, or whose name is on the invoice or receipt, as long as the supply was for the business’s trade and the business ultimately bears the full cost of the expense e.g. by reimbursing the employee or contractor. (#) For this purpose, contractors working for the business count as employees.
When part of an expense is paid by an employer, e.g. for business calls on a private telephone invoice, HMRC will normally allow a proportion of the input VAT, so long as the business received a copy of the employee’s invoice.
Some business costs are paid to employees through their expenses. HMRC accept that if the business is paying these costs that they are legitimate business expenses and will then allow input VAT to be reclaimed, even though the invoice is addressed to the employee instead of the business. This is reflected in HMRC Notice 700, para 19.6.5.
Group or related companies
HMRC will sometimes allow input VAT to be reclaimed in circumstances where they are confident that there was a supply made to the business who will be claiming the input VAT.
This can arise when there is a group of companies with similar names or suppliers address their invoices to the wrong group company in error. It is always best to obtain a purchase invoice in the name of the correct business.
Businesses do not have to have an invoice to claim VAT on an expense. So long as you can prove to the tax man, if required, you simply have to demonstrate that you incurred the cost. So, if you pay for a business trip and loose the receipt, so long as you can show that your employee attended the event then you can prove that a cost was incurred. You then have to demonstrate that the cost incurred for the event is fair.....unless you have a receipt to prove the actual cost.
Other types of VAT reclaim
Businesses receiving services from overseas suppliers must account for VAT using the reverse charge mechanism. Although no VAT is actually charged by the supplier, the UK customer is treated as both the supplier and the recipient for VAT purposes. The purchase is therefore included as output VAT, in box 1 of the VAT return, and input VAT in box 4 of the VAT return. In these cases, input tax can still be recovered, but the business must retain the supplier’s invoice and evidence that the reverse charge VAT was properly accounted for. There may be some VAT restriction in box 4 if the business receiving the purchase or service provides exempt supplies or is partially exempt.
When reclaiming import VAT, it is not enough to rely on a courier’s invoice or delivery note. Instead, the claim must be supported by official HMRC documentation. This would typically be a C79 certificate, a postponed VAT statement, or evidence stamped by Customs on postal imports.
Will HMRC accept alternative evidence?
While a valid VAT invoice is the primary requirement for reclaiming input tax, HMRC may accept alternative evidence in its absence, provided it clearly supports that a taxable supply occurred and VAT was correctly charged and paid. HMRC has a duty to ensure taxpayers don’t overpay tax, but also to protect public funds, so all evidence is assessed carefully.
VAT can sometimes be reclaimed in the absence of a valid VAT invoice. However, a number of other documents are held that allows the following questions to be answered:
Do you have alternative documentary evidence other than an invoice, e.g. a supplier statement?
Do you have evidence of receipt of a taxable supply on which VAT has been charged?
Do you have evidence of payment?
Do you have evidence of how the goods/services have been consumed within the business or evidence about their onward supply?
How do you know the supplier existed?
Has VAT been paid to a taxable person?
Is there evidence of a supplier VAT number?
Does the expense in question relate to the business that is seeking to claim input tax?
The requirement for HMRC to consider alternative evidence has legislative force: VAT Regulations, SI 1995/2518, Reg. 29(2).
Where the supply is of goods not specified as subject to widespread fraud and abuse, the taxpayer can provide satisfactory alternative evidence of the supply and there are no grounds to suspect abuse or fraudulent intent on the part of the claimant, HMRC staff should normally exercise their discretion to allow the taxpayer to deduct the input VAT.
A business should hold the correct VAT evidence before exercise the right to reclaim the input VAT. At times, the proper evidence may not be held. If there is alternative evidence to support the input tax claim to, HMRC could accept this at their discretion.
HMRC’s internal guide states its own position to its VAT officers:
“Where claims to deduct VAT are not supported by a valid VAT invoice, HMRC staff will consider whether or not there is satisfactory alternative evidence of the taxable supply available to support deduction. HMRC staff will not simply refuse a claim without giving reasonable consideration to such evidence. HMRC has a duty to ensure that taxpayers pay no more tax than is properly due. Nevertheless, this obligation must be balanced against a duty to protect the public revenue.”
Most purchases of goods or services will probably involve correspondence with the supplier e.g. with a contract, order, delivery note or supplier statement. Nowadays they are often emailed.
An HMRC officer may ask why a business cannot obtain a copy invoice from the supplier.
It could be that the supplier has ceased to trade or cannot be contacted. Quite often with online purchases no formal invoice is ever received or at least downloaded as part of the transaction. If a business were to buy something over the telephone of or the Internet of and provide credit card details is automatically reduced by the supplier.
In 2007, HMRC issued a Statement of Practice titled ‘VAT Strategy: Input Tax deduction without a valid VAT invoice’. This Statement of Practice it is still quoted in HMRC’s internal manuals so has stood the test of time.
Under the Statement of Practice HMRC must use their discretion and be satisfied that:
The supply as stated on the invoice did take place
There is other evidence to show that the supply/transaction occurred
The supply made is in furtherance of the trader’s business
The trader has undertaken normal commercial checks to establish the bona fide of the supply and supplier
Normal commercial arrangements are in place.
Appendix 2 to the Statement of Practice asks the following questions to determine whether there is a right to claim input VAT in the absence of a valid VAT invoice
Do you have alternative documentary evidence other than an invoice (e.g. supplier statement)?
Do you have evidence of receipt of a taxable supply on which VAT has been charged?
Do you have evidence of payment?
Do you have evidence of how the goods/services have been consumed within your business or their onward supply?
How did you know that the supplier existed?
How was your relationship with the supplier established?
This list is not exhaustive and additional questions may be asked in individual circumstances.
Digital copies
Businesses do not have to retain hard-copy paper invoices for all their purchases and expenses. They can reclaim VAT back using digital copies e.g. through either scanned paper copies or original emailed or downloaded PDF invoices.
Businesses can therefore collect invoices digitally and retain these electronically rather than hold paper originals. However, they must be clearly legible, easily accessible, printable and not manipulated or editable.