In Oval Estates (Bath) Limited v HMRC [2017] UKFTT 403 (TC), the FTT held that input tax was attributable to an identifiable supply and was recoverable despite allegations of deliberate and concealed behaviour.


Oval Estates (Bath) Limited (OEB) is one of a number of property companies under common control, many of which are single purpose vehicle companies set up for the purposes of carrying out specific developments and most, if not all, contain the name Oval.

OEB carried out a commercial development of a warehouse premises and engaged Oval Building Contracts Limited (OBC), a related company, to provide design and build construction services. As the project progressed, OBC invoiced OEB from time to time for the services it provided.

During August 2012, a supplier issued a winding up petition against OBC, and the group applied for a Creditors Voluntary Arrangement (CVA). On 30 September 2012, OBC raised invoice number 265 for services provided to OEB, so that it could be in place for the meeting of creditors. This was a standard invoice with a general description, but did not refer to the payment certificate, however, due to an oversight this invoice was raised later than it should have been and was also issued to the wrong Oval business. On 29 November 2012, OBC's application for a CVA was rejected at the creditors' meeting and OBC went into liquidation.

OEB made a claim to deduct input tax of £33,349.58 in relation to invoice number 265. However, due to an administrative error this claim was made in the 03/13 VAT return.

HMRC disallowed OEB's input tax claim on the basis that it was (1) not directly attributable to an identifiable supply, (2) the description on the supply was inaccurate, (3) the invoice was not a valid VAT invoice and (4) there was no evidence the invoice had been paid. HMRC also issued a penalty on the basis that OEB had displayed 'deliberate and concealed behaviour' because the claim had been made in the VAT period subsequent to the date when the invoice was created.

OEB appealed to the FTT.

FTT's decision

OEB's appeal was allowed, the input tax was recoverable and no penalty was due.

It was clear to the FTT that invoice number 265 did not satisfy the formal requirements for a valid invoice laid down by Article 226(6) and (7) of the VAT Directive 2006/112/EC, or the VAT Regulations. However, European case law confirms that the right to VAT recovery cannot be denied if the substantive conditions for recovery are satisfied.

The FTT found that HMRC had specific information in the form of schedules of work, valuations and contracts which provided sufficient evidence to demonstrate that there was a supply. It concluded that OEB had established its right to deduct the VAT on invoice number 265. There was evidence that OEB had effectively made payment against the invoice received.

With regard to the allegations of deliberate conduct and fraud, the FTT considered that these allegations could only succeed if the evidence established, on the balance of probabilities, that there was such conduct. In this case, the evidence indicated that there was confusion among the accounting staff but not dishonesty. Accordingly, the FTT held that the delay was innocent and not the result of any dishonest arrangement or intent.


HMRC often assess taxpayers and seek to disallow input tax claims on the basis of invalid invoices. The FTT's decision in this case provides a timely reminder of the key conditions that need to be met in respect of every invoice.

If the necessary substantive conditions for recovery of VAT are met and sufficient evidence is provided, taxpayers will be in a position to robustly challenge any assessment.

A copy of the decision is available to view here.