In Stonypath Developments Ltd v HMRC [2020] TC7735, input VAT was disallowed on the purchase from a a related company there was insufficient documentation to support the claim.

Stonypath took some stock from a related company in discharge of a debt owed and treated the transaction as a supply for VAT purposes.

  • The original loan amount, though not properly documented, was £1,265,000.
  • The stock was listed in the VAT return as having a value of £804,267 plus VAT of £160,833.
  • No VAT invoices were issued for the supply.
  • The related company did not account for output VAT on its VAT return and was subsequently wound up after the transaction.

Due to the potential of abuse in this case and the lack of documents supporting such a large loan amount, HMRC took action.

  • It argued that there was not enough evidence that there was a loan between the two entities which was settled by the stocks.
  • As a result, the stock was not paid for (at all or paid for within six months).

The First Tier Tribunal (FTT) placed the burden of proof with Stonypath to establish by evidence on a balance of probability that the £1.265 million debt did indeed exist as claimed.

The FTT established that there were no VAT invoices nor did Stonypath ask HMRC to accept any alternative evidence to an invoice.

The FTT dismissed the appeal on the basis that the supply was not 'paid for' due to lack of documentation 


What constitutes a valid VAT invoice
What is a valid VAT invoice? Can you claim back VAT if the invoice is in someone elses' name?

External links

Stonypath Developments Ltd v HMRC [2020] TC7735