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HMRC internal manual

Tobacco Products Duty

HM Revenue & Customs
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Storage: Stock deficiencies, surpluses and offsetting: offsetting

Only manufacturers who have elected not to break bulk (see section TPD9080) in their registered stores are entitled to “offset” stock deficiencies andsurpluses.

Minor picking errors may occur from time to time resulting in discrepancies (surpluses or deficiencies) in the stock records which cancel each other out over the monthly accounting period. Evidence of such minor errors (eg short delivery of pallets to a customer) might be: trader’s records which show that the relevant day’s stock was increased by the short delivery; a copy invoice and associated credit note; or delivery documents which are noted with details of shortage.

Where such errors involve:

  • packets of the same brand; and
  • packets of the same retail price for duty purposes;
  • do not result in any actual deficiency or surplus of stock; and
  • the trader has opted not to ‘break bulk’ within the physical area designated as the registered premises (see section TPD9080).

you may allow adjustments to be made in the stock account.

If the errors are not self-balancing within the monthly accounting period, you may allow the trader to carry the errors forward to the following month if a compensating error is expected to cancel out the apparent surplus. You may allow this provided that the trader:

  • notifies you of any discrepancies in the stock records as soon as he discovers them;
  • can provide the necessary evidence to satisfy you that the individual discrepancies represent no more than book-keeping or picking errors; and
  • has opted not to ‘break bulk’ within the registered store (see paragraph TPD3160).

Please note that a surplus cannot be carried forward for more than one accounting period. Deficiencies cannot be carried forward. You must call for duty on any unresolved deficiencies within the accounting period.

Any offsetting arrangements do not affect, alter, lessen, or over-ride any requirements arising from the fiscal marks legislation. (See section TPD12000.)

An important legal consideration is that a request to “offset” stock in this manner constitutes a claim that duty has been paid or secured on the discrepancies. The burden of proof that duty has indeed been paid or secured lies with the occupier of the registered store concerned. You should not allow any request to offset based on insufficient evidence. You should treat such cases as ‘missing goods’.