Spencer v Revenue and Customs [2006] UKVAT V19416 (5 January 2006)
19416
INPUT TAX — Pre Sinclair Collis — supply to the Appellant of space upon which to place cigarette vending machines — Appellant paid for the space by commission — Appellant created self billed invoices — no evidence that site owners had treated the supply as taxable — was Appellant entitled to reclaim input tax — no — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	DAVID SPENCER	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	Lady Mitting (Chairman)
						Susan Stott FCA ATII

Sitting in public in Manchester on 5 December 2005

Mr I Hey for the Appellant 

Mr J Cannan, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	The Appellant appeals against a part of two assessments to tax dated 13 August 2001 and 1 November 2001 and covering periods 09/98 to 12/00.  The assessments were raised to make good underdeclared output tax and to recover overclaimed input tax.  The output tax element of the assessment was not challenged before us and we are only therefore dealing with the input tax.  The issue before us is whether Mr Spencer is entitled to claim input tax credit in relation to payments which he has made to pubs and clubs in return for them allowing him to site his vending machines on their premises.  
2.	We heard no oral evidence, the facts being agreed and as we set out below.  We should at this stage just point out that as will be seen from the dates covered by the assessments, we are dealing with a period before the judgment of the European Court of Justice in Sinclair Collis (C-275/01).  Prior to the judgment of the ECJ, the Respondents had treated the supply made by a site owner to the operators of vending machines as an exempt supply, but with the ability to opt to tax if the site owner so chose.  In Sinclair Collis the ECJ found that the liability of the supply made by the site owner to the machine operator was a taxable supply but as we say, this decision post dates the period with which we are dealing.
3.	Mr Spencer carried on the business of selling cigarettes from vending machines which he sited in various clubs, pubs, bars and cafés.  He paid for the right to site his machines by paying the site owner a commission based on, we understand, the number of packs sold from the machine.  Mr Spencer received no paperwork and, specifically, no invoice of any description from the site owner.  It was his practice to treat the commission as inclusive of VAT and to create self billing invoices on which he reclaimed the input tax.  His claim for input tax was thus not substantiated by any invoice from the site owner but only by his own self billed invoices.  This was the position which the assessing officer, Mrs Sally Boyd, found on a visit to the offices of Mr Spencer’s accountants, Heys Business Services, on 11 April 2001.  Her visit had been triggered because Mr Spencer had by then eight outstanding VAT returns.  Following an inspection of the records, Mrs Boyd had three areas of concern, namely a lack of evidence to support input tax deduction on fuel, discrepancies in output tax and the VAT treatment of the commissions.  
4.	With regard to the commissions, the self billed invoices which Mrs Boyd saw were informal and hand written and did not in themselves comply with the statutory requirements for such documents.  Further, Mr Spencer had not been authorised by the Respondents to issue self billed invoices.  Secondly, at that time, the supply of space on which to place vending machines was regarded by the Respondents as the grant of a licence to occupy land and as exempt from VAT unless the site owner had opted to tax in which case he would charge VAT on the supply and account for output tax on it, thus entitling the recipient to reclaim the input tax.  In Mr Spencer’s case, there was no evidence that any of the site owners had opted to tax or had themselves accounted for tax.  For these reasons, Mrs Boyd disallowed Mr Spencer’s claim to recover the input tax on his payments of commission.
5.	Subsequent to the assessment, Mr Spencer had approached all the site owners in an attempt to ascertain their tax status.  By the time of the hearing, approximately one half had responded to him by providing their VAT number but he had had no response from any of them in respect of his query as to whether they had opted to tax.  At the hearing, Mr Hey produced a computer generated set of self billed invoices but he accepted that these would not have been seen by Mrs Boyd and had been produced later.  
Submissions
6.	It was Mr Cannan’s submission that at the relevant time, the site owners’ supplies to Mr Spencer were exempt supplies and unless they had opted to tax and had accounted for output tax, Mr Spencer had no entitlement to reclaim any input tax.  There was no evidence that any of the site owners had opted to tax.  In no case had Mr Spencer been supplied with a tax invoice and there was no evidence that VAT had been charged by any of them.  In accordance with regulation 29 (2) (a) VAT regulations 1995, Mr Spencer should have held a valid tax invoice to enable him to make a claim for recovery of his input tax.  He quite simply did not hold any such document.  
7.	Mr Hey accepted completely Mr Cannan’s submissions but pointed out that Mr Spencer had done everything he could to find out if any of the site owners had opted to tax and in the absence of any co-operation from them, he was of the view that there was nothing further which he could do to support his claim.  
Conclusions
8.	We can really say little more than that we accept Mr Cannan’s submissions.  Mr Spencer had no evidence, and there was no evidence before us, that any of the site owners had opted to tax or had accounted for output tax or had treated the supply to Mr Spencer as a taxable supply.  Mr Spencer consequently lacked any of the documentary evidence necessary to support a claim for recovery of input tax.  We have therefore to find that Mr Spencer had no right of recovery and the assessment was therefore in that respect correctly raised.  Mr Hey made no challenge to the arithmetic or methodology of the assessment which, in respect of the issue before us, we uphold.  
9.	The appeal is therefore dismissed.  Mr Cannan made no claim for costs and we make no order. 

LADY MITTING
CHAIRMAN
Release Date: 5 January 2006
MAN/04/0004