High Court Ruling Clarifies VAT Input Tax Recovery Without Invoices
A recent High Court decision has provided welcome clarity for businesses facing practical difficulties in obtaining VAT invoices, confirming that input tax recovery may still be possible even where a formal invoice is missing.
Case Reference
Case name: R (on the application of Hotelbeds UK Ltd) v Revenue and Customs Commissioners
Citation: [2025] EWHC 2312 (Admin)
Date of judgment: 9 September 2025
Full text: Casemine summary
Background
Hotelbeds UK Limited supplies hotel rooms to tour operators. Payments to hotels were made via virtual credit cards, a process which made it difficult for Hotelbeds to secure valid VAT invoices from the underlying hotel suppliers.
Despite this, Hotelbeds submitted Error Correction Notices (ECNs) to reclaim input VAT using alternative supporting evidence. HMRC exercised its discretion to allow two claims under Regulation 29 of the VAT Regulations 1995 but later refused further claims worth over £10 million, citing a failure to obtain invoices.
The Dispute
HMRC’s position was that without valid VAT invoices, input tax recovery should be refused, particularly where there was a “systematic failure” to secure them.
Hotelbeds argued that:
the underlying supplies were genuine, supported by extensive records,
HMRC’s own guidance (including VAT Notice 700 and internal manuals) recognises alternative evidence can be accepted where invoices are unavailable, and
denying recovery in these circumstances undermined the principle of tax neutrality and was unfair where there was no fraud.
The High Court’s Decision
The High Court agreed with Hotelbeds, ruling that:
HMRC had misapplied its own guidance by treating the absence of invoices as an automatic bar,
the discretion under Regulation 29 must be applied fairly, taking into account all evidence,
refusal of the later ECNs was irrational in public law terms, especially given that earlier, similar claims had been accepted, and
the principle of tax neutrality meant businesses should not be unfairly denied recovery where the transactions are genuine and free from fraud.
Why This Matters
This judgment is significant for businesses that face challenges in obtaining invoices, particularly in sectors involving complex or non-standard payment flows such as:
travel and hospitality,
digital platforms, and
cross-border supply chains.
It confirms that HMRC must exercise discretion realistically and not rigidly. Courts will uphold input tax recovery where genuine commercial activity is evidenced—even in the absence of formal invoices.
Key Takeaways for Businesses
Always make every effort to obtain valid VAT invoices.
If invoices cannot be obtained, keep robust alternative evidence (contracts, booking records, payment confirmations).
Document your attempts to secure invoices.
HMRC’s rejection is not the end of the road—judicial review may be an option where claims are unreasonably refused.
At 4 Eyes Ltd, we advise clients on VAT recovery, HMRC disputes, and compliance across the UK and EU. If your business is experiencing difficulty securing invoices or facing challenges from HMRC, our team can help you assess your evidence and protect your VAT position.