No Input VAT Deduction For VAT Not In Fact Charged

In Zipvit Ltd v HMRC (Case C-156/20), the Court of Justice of the European Union ("CJEU") has held that, where a contract for services provides for VAT to be charged in addition, a taxable person cannot claim to deduct an amount of VAT for which it has not been charged and which it has therefore not passed on to the final consumer.

This decision puts to rest a long-running test case in relation to claims for input tax recovery brought by Zipvit and other businesses which received postal services from Royal Mail which ought to have been treated as taxable. As Advocate General ("AG") Kokott noted in her opinion, the total value of claims made against HMRC amounts to £500 million to £1 billion.