VAT refund without an invoice in the UK

Recently, you made a VAT-taxable purchase for your company. You want to recover it as quickly as possible, but the seller hasn't issued you a sales invoice. In such a situation, can you recover VAT before the invoice is issued, or even if there's no invoice at all?

According to regulations, the right to recover VAT arises at the so-called 'tax point' of supply, meaning it is either the date of goods delivery or the date of the invoice issued by the seller, provided it is dated no later than 14 days from the date of delivery.

The right to recover VAT arises either on the date of goods delivery or on the date the invoice is issued by the supplier, provided it is dated no later than 14 days from the date of delivery.

Situations where statutory deadlines are exceeded are quite common. The mere fact that the supplier has not provided you with an invoice cannot be a basis for claiming a tax refund. In the absence of an invoice, such a basis can be the possession of alternative evidence that the delivery occurred and VAT was paid.

Alternative Evidence of Supply

The tax authority accepts various documents as proof of VAT payment for a given supply. The most common are proof of delivery and proof of payment, but these are not the only ones. This could include a supplier's statement, documents and evidence confirming that the goods supplied were used in your business or supplied onward, evidence of commercial arrangements, etc. According to HMRC guidance, the tax authority will seek answers to the following questions:

• Is there alternative evidence in the form of documents other than an invoice (e.g., a supplier's statement)?
• Is there proof of receipt of a taxable supply on which VAT was charged?
• Is there proof of payment?
• Is there evidence that the goods/services were used in your business or evidence of their onward supply?

If you provide satisfactory answers to the above 4 questions and present appropriate documents, and the circumstances of the case are clear and unambiguous, HMRC staff should allow you to deduct the tax.

When Additional Circumstances Must Be Proven

If the supply concerns goods identified as being subject to widespread fraud and abuse (you can find their description here), the evidence presented is insufficient, or there are grounds to suspect abuse or fraudulent intent on the part of the applicant, then HMRC will require answers to further questions:

• How did the recipient know about the supplier's existence?
• How was the relationship between the recipient and the supplier established?
• Does the customer know the supplier's business location (have they been there)?
• How does the customer contact the supplier?
• If the delivery involves goods, how can it be confirmed they are not stolen?
• How are faulty goods returned?

When this situation arises, the process usually takes longer, and the evidence presented is scrutinized more closely.

Maintain accurate bookkeeping

Well-maintained and accurate accounting should be sufficient to trace transactions and provide HMRC with adequate evidence of their completion. It is important to retain proof of delivery in addition to invoices.

When do you not need to provide evidence for a VAT transaction?

You can reclaim VAT without providing any evidence for transactions under £25. These transactions include purchases made via coin-operated machines, parking fees, bridge and tunnel tolls, etc., and telephone call charges from private or public phones.

When will HMRC accept an incomplete document as sufficient?

This option applies to services and goods valued at no more than £250. In such cases, a simplified document can be presented, containing only basic information, namely:

• the supplier's name and address;
• the type of goods supplied;
• the VAT rate;
• the seller's VAT number.

Such simplified invoices are typically issued by retail businesses.

Note! If the receipt/simplified invoice does not specify the VAT amount, but the supplier is VAT registered, you will only be able to reclaim one-sixth of the input tax paid.

Purchases Made by an Employee

What if your employee makes the purchase? You can still reclaim VAT in this case, but only if the expense has been reimbursed to the employee. This also applies to input VAT on fuel expenses if you pay your employee a mileage allowance for a business trip (the fuel receipts presented must be at least equal to the amount of the travel expense reimbursement, and the expense claim form should include a field for entering the VAT amount).

What can you do if HMRC rejects your VAT refund claim?

According to HMRC guidelines, if sufficient alternative evidence is provided, the right to tax deduction is granted. However, it's important to remember that decisions are made by officials on an individual and discretionary basis, so they may issue a refusal. If you disagree, you can appeal to a tribunal. This happens quite often, so there is extensive case law on the subject. You can find an up-to-date list of VAT appeals that HMRC has lost or partially lost here. Check if there are any cases similar to yours on this list. If you find one, you can refer to that ruling in your potential dispute with the tax office.

Incorrect VAT refund claim

The rule is that the larger the requested refund amount, the more closely HMRC will scrutinise the transaction and the accompanying evidence during an inspection. Therefore, if the requested amounts are large, make sure you meet HMRC's criteria and that the claimed amounts are correct.

Ensure you have appropriate evidence for each claim to support your right to a VAT refund. Inaccuracies and negligence may result in penalties from the tax authority. You can find details on this here. HMRC can impose a penalty of up to 100% of any underpaid or overpaid tax if you submit an inaccurate return.

Correct VAT invoice - what should it contain?

It is always better not to have to prove anything to HMRC in additional proceedings, so it's best to have a proper invoice. What such a correct invoice should contain is detailed in HMRC guide. You can also find additional information in our article, available at this link.