Commentary

V3.402 Meaning of “input tax”; tax treated as such

Part V3 Supplies, acquisitions and imports

V3.402 Meaning of “input tax”; tax treated as such

V3.402 Meaning of “input tax”; tax treated as such

Input tax

VAT is tax properly chargeable, paid or payable on1

  1.  

    (1)     goods and services supplied2 or deemed to be supplied to a person3;

  2.  

    (2)     goods acquired by a person from another EU member state4; and

  3.  

    (3)     goods imported by a person from a place outside the member states5.

The word “chargeable” is implied in VATA 1994 s 24(1). If tax is charged in error, it cannot be VAT and therefore cannot be input tax6 (or, for that matter, output tax7). Conversely, tax which is chargeable may be input tax even where the supplier is not VAT registered8. A claim for such input tax will, however, be at the discretion of HMRC; SI 1995/2518 reg 29(2)9 The failure to exercise such discretion may invalidate any related assessment, although such an assessment may be reinstated (subject to the normal rules) once the discretion has been exercised10, subject to the normal rules.

In certain circumstances, HMRC may allow tax which is not chargeable to be regarded as VAT and hence input tax11.

Where HMRC have recovered from the supplier an amount equal to the purported VAT (under VATA 1994 Sch 11 para 5), they may allow the supplier to deduct from that amount any related VAT incurred by him.

It has been held that the tax charged under a fraudulent arrangement such that the goods were never delivered was not VAT since no supply took place12.

In a subsequent case13, however, it was held that “these two

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