19922
	
VAT: INPUT TAX – Appellant) claimed input tax on supplies of antique jewellery – the supplies not evidenced by a valid VAT invoice – Appellant produced no alternative evidence to substantiate his input tax claims – no jurisdiction to entertain a misdirection claim – unjust enrichment irrelevant – Appeal dismissed

LONDON TRIBUNAL CENTRE

	SIMON MARTINEZ  	Appellant
    trading as
MARTINEZ ANTIQUES
	
     - and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      MICHAEL SHARP		  (Member)

Sitting in public in London on 6 November 2006

Kevin Andrews, VAT consultant for the Appellant 

Sarabjit Singh, counsel instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION
The Appeal
1.	The Appellant was appealing against:
(1)	An assessment for VAT dated 20 May 2005 in the sum of £736,435 plus interest for VAT periods 09/03 to 09/04.
(2)	The Respondents’ decision dated 18 March 2005 to disallow the input tax claim for period 10/04 which resulted in the Appellant being required to pay a sum of £11,114.16 in VAT.
2.	The grounds of Appeal were:
“Mr Martinez took due care as any responsible business person would that his transactions were correctly handled. Payments including invoices and VAT were made to invoices as expected throughout this wholesale trade with the legal expectation of being able to recover the VAT paid on purchased goods. The invoices show sufficient detail to be identifiable in books and records, VAT number and VAT amount. The invoicing method is common throughout this trade sector”.
The Evidence
3.	We heard evidence from the Appellant and his son, Marcel Martinez. Mr Richard Jones who made the assessment dated 20 May 2005 and disallowed the input tax for the period 10/04 gave evidence for the Respondents. We also received a bundle of documents in evidence.
The Dispute
4.	The Appellant carried on business as an antique trader from an emporium in Stables Market, London. He was registered for VAT from 1 August 2003. On 18 April 2005 the Appellant applied to deregister from VAT with effect from 16 December 2004 on the grounds of ill-health.
5.	In 2003 the Appellant was introduced to Michael Mendoza from the United States of America who wished to purchase antique jewellery from the United Kingdom. Mr Mendoza engaged the Appellant to find suitable pieces of jewellery. The Appellant, in turn, sourced the jewellery on a sale or return basis from a single company, London Repro Limited, which was replaced with Morning Star Metal Limited when London Repro Limited became insolvent in June 2004.  Once he had obtained suitable pieces of jewellery, the Appellant or his courier would take the pieces to the United States where Mr Mendoza would select the items he wanted and pay for them in cash. The Appellant did not make a significant profit from his transactions with Mr Mendoza. The Appellant’s motivation for doing business with Mr Mendoza was that it gave him an opportunity to travel and meet a new circle of people.
6.	The Respondents had no issue with the manner in which the Appellant conducted his transactions with Mr Mendoza. The transactions were properly documented with  C88 export declaration forms and  fully particularised invoices. The disputed issue concerned the dealings between the Appellant and London Repro Limited, and later Morning Star Metal Limited upon which the Appellant had obtained credit for the VAT paid.   The Respondents submitted that the invoices supplied by London Repro Limited and Morning Star Metal Limited to the Appellant did not meet the requirements of Regulation 14 of the VAT Regulations 1995. Thus the invoices did not constitute sufficient evidence to support the Appellant’s claims for input tax. As the Appellant could produce no other evidence to substantiate his claims, the Respondents were entitled to recover the VAT credited under these transactions by raising an assessment under section 73(2) of the VAT Act 1994.
7.	The Appellant submitted that the disputed invoices, although not perfect, contained sufficient information to meet the requirements of Regulation 14. Further, Miss Fish, HM Revenue and Customs Officer, approved the Appellants’ claim for input tax for 09/03 which was evidenced by the invoices, now considered defective by Mr Jones. The Appellant was of the view that the Respondents were not entitled to go back on the decision made by Miss Fish. Finally, London Repro Limited and Morning Star Limited paid output tax on their supplies to the Appellant, the Respondents were enriching themselves unjustly by attempting to recover the input tax claimed by the Appellant. 
8.	The disputed issues were as follows:
(1)	Did the invoices relied upon by the Appellant to evidence his claim for input tax meet the legal requirements of Regulation 14 of the VAT Regulations 1995?
(2)	Did the Appellant have other evidence to support his claims for input tax?
(3)	Were the Respondents prevented from disputing the input tax claims after Miss Fish’s decision to admit the claim for 09/03?
(4)	Were the Respondents entitled to assess the Appellant to recover the input tax paid to the Appellant?
Reasons for Our Decision
Legal Requirements of Regulation 14
9.	Under section 25 of the VAT Act 1994 a taxable person is entitled at the end of each accounting period to credit for input tax paid on taxable supplies of goods or services made by a taxable person. Section 24(6) (a) of the 1994 Act enables Regulations to be made which provide for VAT to be treated as input tax only if and to the extent that the charge to VAT is evidenced and quantified by reference to such documents or other information as may be specified in the Regulations or the Commissioners may direct either generally or in particular cases or classes of cases. Regulation 29(2)(a) of the VAT Regulations 1995 requires a taxable person to hold a VAT invoice for the supply from another taxable person, in respect of which a claim for input tax is made. Regulation 14(1) of the 1995 Regulations specifies the contents of a VAT invoice. 
10.	Under Regulation 14 a VAT invoice shall contain the following particulars:
(1)	an identifying number;
(2)	the time of supply;
(3)	the date of issue of the document;
(4)	the name, address, and registration number of the supplier;
(5)	the name and address of the person to whom the goods or services are supplied;
(6)	a description sufficient to identify the goods or services supplied;
(7)	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;
(8)	the gross total amount payable excluding VAT;
(9)	the rate of any cash discount offered;
(10)	the total amount of VAT chargeable;
(11)	the unit price (only with effect from 1 January 2004).
11.	The table below sets out details of the invoices supplied by the Appellant to support his claims for input tax, which were the subject of the Appeal.
Period	Assessed Tax (£)	Invoice Details	Missing details  as required by Regulation 14	
09/03	72,963	5 invoices issued by London Repro Ltd. The description of the goods on the invoices were as follows:
“Assorted Repro Furniture”
“Ornamental lamps, tiffany etc, ornate glass, side lamps, pictures, oils, prints”
“Quantity of silver plate”
“Antique goods as my SOR list”
“A selection of contemporary art, bronzes, sculptures”.
A global price was allocated to each of the above descriptions 	None of the invoices had identifying numbers.
Incorrect address for supplier.
No time of supply of the goods, although each of the invoices were dated.
No VAT rate declared on the invoices

10/03	55,615	No VAT invoice, according to the Appellant the invoices for 10/03, 11/03, 12/03 and 01/04 were in a briefcase, which was stolen from his car.		
11/03	71,365	No VAT invoice		
12/03	55,244	No VAT invoice		
01/04	49,105	No VAT invoice		
02/04	54,250	One invoice from London Repro Ltd which described the goods as:
“Quantity of silver items and a mixed parcel of quality of jewellery items	No identifying number, time of supply not stated, incorrect address for the supplier and no VAT rate.	
03/04	55,650	One invoice from London Repro Ltd which described the goods as:
“Assorted goods, silver and antique items”.	No identifying number, time and date of supply not stated, and no VAT rate.	
04/04	52,920	One invoice from London Repro Ltd which described the goods as:
“A quantity of assorted items, silver, jewellery, furniture etc”.	No identifying number, time and date of supply not stated, and no VAT rate.	
05/04	54,582	One invoice from London Repro Ltd which described the goods as:
“A quantity of assorted items, eg jewellery and silver items”.	No identifying number, time and date of supply not stated, incorrect address for the supplier and no VAT rate.	
06/04	54,722	One invoice from Morning Star Metal Ltd which described the goods as:
“A quantity of assorted diamond and gold jewellery, selection of silver snuff boxes, stamp boxes and bronze and antique items”. 	No identifying number, time and date of supply not stated, and no VAT rate.	
07/04	54,407	One invoice from Morning Star Metal Ltd which described the goods as:
“A quantity of assorted diamond and gold jewellery, selection of silver snuff boxes, also various silver figures and candle sticks”.	No identifying number, time and date of supply not stated, and no VAT rate.	
08/04	52,080	One invoice from Morning Star Metal Ltd which described the goods as:
“Antique silver jewellery and antique silver to include a silver soup tureen and ladles set, plus jade items”.	No identifying number, time and date of supply not stated, and no VAT rate.	
09/04	53,532	One invoice from Morning Star Metal Ltd which described the goods as:
“Antique silver various gold and diamond jewellery, also to include 2 full sets of silver spoons Geo 111 and a large quantity of cutlery items etc.”.	No identifying number, time and date of supply not stated, and no VAT rate.	
10/04	11,144.16	One invoice from Morning Star Metal Ltd which described the goods as:
“Antique silver items, jewellery, snuff boxes, figures also include gold and diamond jewellery”. 	No identifying number, time and date of supply not stated, and no VAT rate.	

12.	 The Appellant bought the antiques in lots for cash. According to the Appellant it was not customary for antique traders to issue detailed invoices or practicable for the lots to be broken down into individual items on the invoices. The trader’s usual response to a request for a detailed invoice was “take the goods or leave them”. 
13.	The Appellant’s representative referred to paragraph 16.3.2 of VAT Notice 700/16, “VAT Invoices: General Rules”, which stated that it was not necessary to record the unit price on the VAT invoice, if the supply could not be separated out into countable goods or the unit price was not normally provided in a particular business sector.
14.	VAT Notice 700/16 was advisory without the force of law. The particular paragraph relied upon by the Appellant’s representative related to unit price. It did not enable a trader to avoid the requirement under Regulation 14 to record a sufficient description of the goods supplied in the invoice. The Appellant adduced no compelling evidence that it was customary for antique traders to issue invoices containing a general description of the goods sold. The Appellant’s contention was contradicted by his own practice of describing the goods in his own invoices. The fact that the disputed invoices were issued by traders over whom the Appellant had no control was irrelevant. The Appellant had the choice of turning down the deal, if the trader refused to issue a detailed invoice.
15.	We set out the description of the goods recorded in the disputed invoices in the table at paragraph 11 above. We consider that the description in each of the invoices was too general and insufficient to identify how the individual goods were used in the Appellant’s business. We find that the description in each of the disputed invoices failed to meet the requirement of Regulation 14 of sufficiently identifying the goods supplied.  Further each of the disputed invoices breached the requirements of Regulation 14 in other respects, namely, no identifying number, no time and date of supply, incorrect suppliers’ address and no VAT rate, as detailed in the table at paragraph 11.
16.	We, therefore, hold that the disputed invoices for periods 09/03, and 02/04 to 10/04 were not valid VAT invoices for the purpose of evidencing the Appellant’s claims for input tax. Further we hold that the Appellant provided no VAT invoices for the periods 10/03 to 01/04.
Other Evidence to Support Input Tax Claims
17.	Under Regulation 29(2) of the 1995 Regulations the Respondents are given the power to require a taxable person to hold or provide such other evidence in support of a claim for input tax. The Respondents have issued a Statement of Practice (SP 7/2003) effective from 16 April 2003, regarding the circumstances in which input tax recovery would be allowed in the absence of a valid VAT invoice. A taxpayer is required, in addition to providing alternative evidence, to be able to answer satisfactorily most (or, in the case of supplies involving specified goods, all or nearly all) of the following questions:
(1)	Is there alternative documentary evidence other than an invoice (eg supplier statement)?
(2)	Is there evidence of receipt of a taxable supply on which VAT has been charged?
(3)	Is there evidence of payment?
(4)	Is there evidence of how the goods/services have been consumed within the claimant’s business or their onward supply?
(5)	How did the claimant know that the supplier existed?
(6)	How was the claimant’s relationship with the supplier established?
18.	 The Appellant conducted his dealings with London Repro Ltd and Morning Star Metals Ltd in cash. The Appellant was unable to produce receipts or bank statements to substantiate the payments to the two companies for the purchased goods. The Appellant adduced no documentary evidence other than the disputed invoices to demonstrate that he had been supplied with goods by London Repro Ltd and Morning Star Metals Ltd. 
19.	Mr Jones, the assessing officer, made enquiries about Morning Star Metals Ltd which included visiting the address recorded on its invoices to the Appellant. The address was sited on a small light industrial estate. Mr Jones, however, could find no trace of the company at the given address. His enquiries with other firms on the estate revealed that no-one had heard of the company.
20.	 We find that the Appellant has produced no alternative evidence to substantiate his claims for input tax.
Were the Respondents prevented from disputing the input tax claims?
21.	The Appellant’s representative referred to the “Sheldon Statement” , which has been incorporated in Customs and Excise Notice 48 Extra Statutory Concession 3.5 VAT – Misdirection:
“If a Customs and Excise officer, with the full facts before him, has given a clear and unequivocal ruling on VAT in writing or, knowing the full facts, has misled a registered person to his detriment, any assessment of VAT due will be based on the correct ruling from the date the error was brought to the registered person’s attention”.
22.	The Representative stated that Miss Fish approved the Appellant’s VAT claim for 09/03 which was based on invoices with the same characteristics as the later invoices examined by Mr Jones.  The Appellant was entitled to rely upon Miss Fish’s ruling  regarding the invoices with respect to his subsequent claims for input tax. The Respondents were, therefore, precluded from raising an assessment for the disputed input tax in accordance with the terms of Extra Statutory Concession 3.5.
23.	The Respondents disputed whether Miss Fish misled the Appellant on the validity of the invoices. Mr Jones was unable to say whether Miss Fish considered the invoices for 09/03 period which the Appellant produced at the hearing.
24.	 Whatever the merits of the Appellant’s contention, we have no jurisdiction to determine whether the circumstances regarding Miss Fish’s approval of the 09/03 input tax claim met the requirements of Extra Statutory Concession 3.5.  The Tribunal’s appellate jurisdiction is restricted to those matters set out in sections 83 and 84 of the VAT Act 1994 which does not include extra statutory concessions. Customs and Excise Notice 48 makes it clear that only the Respondents can grant relief where the circumstances fall within the terms of an extra statutory concession. If the Appellant wishes to pursue this matter, then he should invoke the Respondents’ complaints procedure as advised in the Respondents’ letter dated 8 August 2006.
Were the Respondents entitled to raise an assessment to recover the input tax?
25.	The Appellant’s representative alleged that the Respondents were enriching themselves unjustly by their assessment to recover the input tax claimed by the Appellant. The Representative contended that London Repro Ltd and Morning Star Metals Ltd had accounted for output tax on their supplies to the Appellant. The recovery of the input tax claimed on those supplies would result in the Respondents receiving double the amount of VAT due. At first Mr Jones accepted that the Respondents had suffered no tax loss from the payment of the input tax to the Appellant. Later on in his evidence Mr Jones retracted his earlier statement and implied that there had been a loss to the revenue.
26.	Section 73(2) of the VAT Act 1994 authorises the Respondents to assess for input tax which ought not to have been paid. We found that the Appellant should not have been paid the input tax for the periods 09/03 to 10/04 because he failed to produce the required evidence to support his claims for input tax for the said periods. In those circumstances, the requirements of section 73(2) have been met and the Respondents were entitled to assess the Appellant for recovery of the input tax wrongly paid. The issue of whether there had been a loss to the revenue was not a relevant consideration for the exercise of the Respondents’ power of assessment under section 73(2) of the 1994 Act.
Summary of Our Decision
27.	 We have decided that
(1)	The disputed invoices for periods 09/03, and 02/04 to 10/04 were not valid VAT invoices for the purpose of evidencing the Appellant’s claims for input tax. Further we hold that the Appellant provided no VAT invoices for the periods 10/03 to 01/04.
(2)	The Appellant produced no alternative evidence to substantiate his claims for input tax.
(3)	We have no jurisdiction to determine whether the circumstances regarding Miss Fish’s approval of the 09/03 input tax claim met the requirements of Extra Statutory Concession 3.5.
(4)	The Appellant should not have been paid the input tax for the periods 09/03 to 10/04 because he failed to produce the required evidence to support his claims for input tax for the said periods
(5)	The Respondents were entitled to assess the Appellant for recovery of the input tax wrongly paid.
28.	We, therefore, dismiss the Appeal and make no order for costs.

                       

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 6  December 2006

LON/