Indeed, the tribunal chair was sufficiently reassured by the fact that her decision would inevitably be appealed that she decided one critical part of the case in the absence of representations on the point, which, she implied, she might have been reluctant to do had there been a chance that the result would stand unappealed.

The point was whether a purchaser of services that had been treated as exempt, even though they had been taxable, could reclaim input tax without an invoice and without the supplier having paid the VAT.

The supplier was a branch of Royal Mail, the VAT treatment of whose supplies has been a controversial matter in recent years.

This is a highly technical issue.

In summary, Zipvit said it had paid hidden VAT in the price but had been denied VAT invoices.

HMRC said that the VAT had not been brought to account by Royal Mail so there was no VAT to claim.

Even if that was wrong, HMRC argued that the ability to reclaim VAT unjustly enriched Zipvit since it should bear the economic cost of the VAT it sought to claim.

Zipvit said it had done so, because the contract price included VAT and it was irrelevant that it had not recognised this at the time of making the purchase.

The decision was based on the observation that the input VAT had, per the VAT Directive, to be VAT ‘due or paid’.

The tribunal decided that this referred to the seller’s obligation to pay, not to the buyer’s (though neither party advanced that interpretation).

As Royal Mail had not been required to pay it by HMRC, it was not ‘due’, and on that basis could not be input tax for the buyer. As the tribunal noted, this decision is certain to be appealed.

About the author

Graham Elliott is transaction tax consultant at Withers LLP www.withersworldwide.com