In Gradon Construction Limited v HMRC [2016] TC04935 input tax credits were refused as invoices were not valid for VAT and there was insufficient additional supporting evidence.

  • A number of invoices were issued to the taxpayer (a construction company) by a local labour supplier between June 2012 and January 2013.
  • The labour supplier subsequently deregistered for VAT with effect from 1 October 2012.
  • HMRC challenged the recovery of input tax on invoices after this deregistration.
  • The only additional evidence the taxpayer could supply was bank statements and a one-page subcontractor agreement.

The First Tier Tribunal (FTT) held that:

  • The invoices were not valid VAT invoices: the vague and limited description of services was not sufficient to identify the goods or services supplied.
  • It was reasonable for HMRC to not exercise their discretion to allow credit due to the limited alternative information provided by the taxpayer.

Interestingly, HMRC had originally argued that the de-registration of the supplier rendered the VAT invoices invalid. However, before the hearing they withdrew this argument on the grounds it was incorrect before then attempting to raise it again in their skeleton argument.  The FTT held it would not be fair to entertain an argument which HMRC had raised, the dropped and raised again so found that the de-registration alone did not render the invoices invalid.

In addition, the fact that HMRC had not challenged earlier invoices (i.e. pre de-registration of the supplier) did not have any bearing on the reasonableness of denying a credit on the invoices under review.


This case highlights again the importance of getting detailed invoices from suppliers.  This can hive implications beyond VAT, such as the ability to claim capital allowances.

See our guide What constitutes a valid VAT invoice for more details.


Case reference: Gradon Construction Limited v HMRC [2016] TC04935