In a landmark decision, the First-tier Tax Tribunal (FTT) ruled in favour of Fount Construction Ltd against HM Revenue and Customs (HMRC) in the case [2024] UKFTT 340 (TC). The case revolved around the disallowance of input tax recovery claims due to allegedly insufficient invoice descriptions.
Background of the Case
Fount Construction Ltd faced a significant challenge when HMRC disallowed claims for the recovery of input tax based on three invoices. These invoices, referred to as the “Contested Invoices,” collectively amounted to a VAT total of £15,218.59. The Contested Invoices contained the description “Building Works at the above” alongside the job address of the respective building site.
HMRC argued that these invoices failed to meet the legislative requirements specified under Regulation 14(1) paragraphs (g) and (h) of the VAT Regulation 1995, which state:
- Paragraph (g): A description sufficient to identify the goods and services supplied.
- Paragraph (h): For each description, the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT, expressed in any currency.
FTT’s Decision
The FTT’s ruling provided a much-needed clarification on what constitutes a sufficient invoice description. The Tribunal emphasised that the primary purpose of the description on an invoice is twofold:
- To ensure that both the customer and supplier have a mutual understanding of the services the invoice pertains to.
- To offer HMRC a clear understanding of the essential nature of the supply, facilitating further enquiries if needed.
Contrary to HMRC’s stance, the FTT asserted that the invoice description does not need to be detailed enough to allow HMRC to form definitive views on the VAT treatment of the supply based solely on the invoice. The FTT stated, “The invoice is a gateway into any enquiries by HMRC, rather than a repository to any questions that might be asked.”
As a result, the FTT concluded that the brief description on the Contested Invoices was adequate to satisfy the requirements of Regulation 14, and the appeal by Fount Construction Ltd was allowed.
Key Takeaways
This decision underscores the importance of understanding the requirements for invoice descriptions and highlights that while invoices should be clear and informative, they do not need to include exhaustive details. Instead, they should provide enough information to facilitate further enquiries if necessary.
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