The detail is included in VAT Notice 700 which is required reading for any VAT registered business. If you haven’t printed off a fresh copy of this notice since August 2017, do so now, as there have been some extensive updates. One area which has been clarified is the evidence required to support a claim for input tax if a valid VAT invoice is not available (para 16.8). Of-course the trader should always ask his supplier for a VAT invoice, but if the supplier has gone bust, or can’t be contacted, evidence from the following list can be used:
- bank statement clearly showing payment of the supply to the supplier;
- purchase order;
- evidence of how the trader identified the supplier and the negotiations with them;
- contracts between trader and supplier;
- delivery note evidencing the transportation and delivery
- documents supporting storage or insurance of the goods
- supplier statement that shows a supply took place between the trader and supplier.
The trader will then be required to HMRC that ALL the following conditions were met
- the supply took place in the UK
- it was taxable at the standard rate or a reduced rate of VAT
- the supplier was registered for VAT in the UK, or was required to be registered
- the trader who received the supply was a taxable person when the VAT was incurred and
- the trader has used, or intends to use, the goods or services for business purposes.
In rare circumstances, for example where a trader has lost some or all of his accounting records, HMRC will permit the trader to use estimated figures on his VAT return. Permission to use estimated amounts must be applied for in writing from the VAT written enquiries team, and the request must set out how the estimated figures will be corrected.
Where approval for using estimated figures is given, and the VAT is paid on time in respect of those estimates, the trader will not be in default. Any correction to the estimated amounts should be made on the VAT return for the next period, or the following period where HMRC agree the earlier correction is not possible.