Beleaguered regular readers will recall the Good Law Project’s ongoing High Court dispute with Uber in relation to its tax avoidance. You can see the latest briefing here.

Earlier today, I opened up a new front in that dispute. It’s important, but to understand it, you’ll need a short lesson in VAT.

Pay attention at the back.

Assume you’re registered for VAT. When you sell something for 100 you actually charge your customer 120 including VAT. Tax lawyers call the extra 20 your output tax. Now, assume that to make the thing worth 100 you have to buy stuff worth 70. Your supplier (if also registered for VAT) will also charge you an extra 20% so you’ll end up paying 84. The extra 14 is called your input tax. (Of course, for your supplier that 14 is a tax on its sales and so, for it, it is output tax).

Then, every so often, you pay to HMRC the difference between all of the 20s you’ve charged and all the 14s you’ve paid. On all the value you’ve added – hence “value added tax”.

Because the 14s reduce the amount of money you have to hand over to it, HMRC obliges you to hold good evidence that you’ve paid those 14s. They require you to hold a VAT invoice from your supplier. But they also recognise that sometimes it might be pretty clear that you’ve paid those 14s even though you don’t hold an invoice. And so they retain a discretion to allow a claim for a 14 even without an invoice.

Now, I say I took an Uber and that I am entitled to recover VAT on the cost of that journey. But I don’t have a VAT invoice because Uber won’t give me one. My claim that it must is the subject of the High Court case mentioned above.

But I can ask HMRC to exercise its discretion to allow me to claim the £1.06 of input tax I say I paid to Uber even without a VAT receipt. And earlier today I did. You can read my letter here HMRCInputTaxLetter.

Now, why is that important?

Well, if HMRC decides to allow my claim it will be accepting that I have paid £1.06 input tax to Uber and, implicitly, that it has to collect that £1.06 from Uber. And if that is true for my £1.06 it will also be so for every other £1.06 Uber has ever charged.

And if HMRC decides to refuse my claim I could have the opportunity to appeal against that rejection and contend that, contrary to its decision, I have paid input tax to Uber. And if I won that appeal the tribunal would be deciding that Uber has charged VAT and, implicitly, has to pay that VAT to HMRC. Along with all the other VAT Uber has charged.

And that appeal would be heard before the First-tier Tribunal (Tax Chamber). I would be the Appellant, HMRC would be the Respondent and Uber would be grumbling in the back of the room. And, unlike in the High Court, in the Tax Chamber the loser doesn’t have to pay the winners’ costs.