VAT & Personal Shoppers

The First-tier Tribunal's decision in Plat UK Ltd is a sharp lesson for any business recovering VAT on goods bought through retail channels for onward sale.

Plat UK claimed around £471,000 of input tax on luxury goods bought from retailers including Harrods, Louis Vuitton and Dior, which it sold on to consumers in South Korea. Rather than buying through wholesale channels, it used a number of individuals as undisclosed agents to buy the goods in stores and online, often on personal reward cards whose terms limited them to non-commercial use. The retailers therefore believed they were selling to individual shoppers for personal use, and no VAT invoices were sought at the point of sale.

HMRC denied recovery. Its central point was that, because the retailers did not know they were dealing with a business, the supplies were not made to Plat UK under the rules governing purchases through agents.

When the compliance check began, Plat UK obtained detailed invoices from Harrods after the event. It accepted these did not adequately describe the goods and were therefore defective. To bridge the gap it argued that the defective invoices could be read together with the original till receipts to satisfy the requirements between them. The tribunal rejected that on two grounds: the invoices were not held when the claim was made, and the required information must appear in a single document, not be assembled from a defective invoice and a separate receipt.

Without valid invoices, recovery depended on HMRC exercising its discretion to accept alternative evidence. HMRC declined, and the tribunal found that refusal entirely reasonable. The covert use of individual shoppers and personal loyalty cards gave HMRC a proper basis to doubt that the goods had been supplied to the business at the point of sale. The appeal was dismissed and the full claim lost.

A valid VAT invoice, held at the time of the claim, remains the foundation of input tax recovery, and it cannot be manufactured after the event or pieced together from separate documents. Businesses running personal shopper or proxy buying models, relying on till receipts or invoices obtained later, are exposed. Where the sourcing method itself disguises the commercial purpose, HMRC's discretion is unlikely to rescue the claim.

If your business or your clients recover VAT on retail sourced goods for resale or export, VITA can review whether the evidence would withstand scrutiny.