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HMRC internal manual

Tobacco Products Duty

Storage: Stocktaking

The purpose of stocktaking is to check that the physical stock agrees with the stock record. A disparity will mean that there has been a failure of either the system for physically controlling the stock or the system for recording the stock. Stock may be lost or mislaid for a number of reasons. It may be stolen, wrongly located in the racks, left in gangways or delivered in error. Stock records dependent on paperwork will be susceptible to legibility errors, missing documentation, etc Comparable problems with computer-based stock accounts centre on inaccurate data entry and, in addition, may suffer from processing faults. If stock is not checked, the credibility of the whole stock control operation is gradually eroded and the book or computer records start to lose touch with reality.

When reviewing the trader’s system you should bear the following points in mind.

  • The frequency of stocktaking should be related to the number of transactions (the more movements, the larger possibility for error). In some stores daily stocktaking has been found to be appropriate.
  • Stocktaking should be the responsibility of a senior manager who has no direct operational responsibility for either warehousing or accounting. This should ensure that the reconciliation of the two accounts is carried out impartially.
  • Stocktakers should not be aware of the book figures. Adjustments will be necessary when the physical position is different to that shown in the stock account. Surpluses or deficiencies may be rationally explained by posting errors, stock movement errors, etc Their resolution must be fully documented and authorised by the trader’s management.
  • Local procedures for notifying discrepancies and accounting for duty should be established and agreed.

Attendance at a stock take is essential if the actual procedures involved are to be evaluated. It is important to ensure that there is a clear separation of responsibilities between staff maintaining the records, carrying out the physical stock check and reconciling the results.