Commentary

V3.421 Supplies made to the claimant

Part V3 Supplies, acquisitions and imports

V3.421 Supplies made to the claimant

Transactions giving rise to input tax credit

V3.421 Supplies made to the claimant

Introduction

Since input tax is, inter alia, VAT on the supply to a taxable person of goods or services1, it follows that the following conditions must be met for input tax credit to be available—

  1.  

    (i)     a supply must have taken place; and

  2.  

    (ii)     the input tax credit must be claimed by the taxable person to whom the supply is made.

In addition—

  1.  

    (iii)     the supply must be chargeable to tax at the rate claimed2;

  2.  

    (iv)     the claimant must hold satisfactory documentary evidence of his entitlement to input tax credit3.

These conditions are discussed under the headings below.

(i) Requirement for a supply to have taken place

No entitlement to an input tax credit can arise unless the payment made relates to a supply of goods or services, even if a VAT invoice is issued. Thus, credit for input tax has been denied where the payment was compensatory and did not involve a supply4, where an invoice was issued in respect of a fictitious transaction5, and where the supplier was not a taxable person6.

The time at which a supply is deemed to take place may be prior to the time when the supply is actually made and tax may therefore properly be shown on a VAT invoice in advance of the property in the goods being transferred from one taxable person to another or services being performed. However, the tax charged in these circumstances is not “tax chargeable” unless

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