FS Commercial Ltd v The Commissioners for HMRC

Grounds of appeal must identify the material factual and legal issues with sufficient clarity for the tribunal and respondent to understand the case advanced. A general assertion that an input-tax claim is valid does not, without more, plead reliance on valid VAT invoices.

Where HMRC refuses input tax because the taxpayer has not produced invoices or sufficient supporting evidence, its decision under Regulation 29 is discretionary. The First-tier Tribunal has a supervisory jurisdiction: it determines whether no reasonable officer could have made that decision, rather than determining entitlement afresh. Evidence not before the decision-maker cannot be introduced to bypass that discretion.

HMRC assessed FS Commercial Ltd for VAT input tax claimed for periods between May 2016 and November 2018. HMRC considered that the company had not provided sufficient evidence, including invoices underlying consolidated payments described as “Verity”.

Before the substantive appeal, the First-tier Tribunal held that its jurisdiction was supervisory and that the company could not rely on invoices not supplied to HMRC before the assessment. The company appealed, contending that its grounds before the First-tier Tribunal included reliance on valid invoices and that the tribunal’s jurisdiction was appellate.

The central issues were whether the grounds pleaded possession of valid VAT invoices and whether the First-tier Tribunal could consider invoices not provided to HMRC when the assessment decision was made.

1. Appeal dismissed. The First-tier Tribunal made no error of law in determining the preliminary issues in HMRC’s favour.

2. Under Rule 20 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, grounds must identify the factual and legal matters by which the appellant challenges the decision. They must be intelligible as a self-standing document or make an explicit reference to the decision under challenge. The company’s assertion that its input-tax claim was valid did not state, expressly or by sufficiently clear implication, that it held valid VAT invoices. A generic reference to HMRC’s decision, business records, or a desired result could not supply that unpleaded ground.

3. A taxpayer ordinarily needs a valid VAT invoice to exercise the right to deduct input tax. In its absence, HMRC may exercise its discretion under Regulation 29(2) of the Value Added Tax Regulations 1995 to accept alternative evidence. Where HMRC decided that the evidence supplied was insufficient, the appeal concerned that discretionary decision. The First-tier Tribunal therefore had a supervisory, not a merits or substitutionary, jurisdiction.

4. The relevant question was whether Officer Mills had acted as no reasonable officer could have acted, assessed on the facts and material available when he decided to issue the assessment. Although the company asserted that valid invoices existed, it had not provided the Verity invoices despite repeated requests. Its later production of invoices could not require HMRC’s earlier discretionary decision to be reconsidered or enable the tribunal to decide the substantive entitlement afresh.

5. The company had no permission to advance a further ground based on the Gora principle. In any event, the asserted invoices were not relevant evidence at the substantive hearing. The First-tier Tribunal’s conclusions were confirmed.

• Upper Tribunal (Tax and Chancery Chamber): dismissed the company’s appeal and confirmed the First-tier Tribunal’s preliminary conclusions.
• First-tier Tribunal (Tax Chamber): held that its jurisdiction over HMRC’s Regulation 29 decision was supervisory and that invoices not provided to the HMRC decision-maker could not be relied on at the substantive hearing.