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HMRC internal manual

VAT Assessments and Error Correction

Standard Notice 655 not appropriate: Acquisition of certain goods by non taxable person

Private individuals who purchase excise goods, for personal use, from another EC member state will always buy these on a tax paid basis in the country of supply.

There will be occasions, however, when a person who is not registered for VAT purchases goods, from another EC member state, for use in their business, in which case they must account for VAT on acquisition of those goods in the UK.

Any person can commercially import excise goods from other member states on a one-off basis, or from time to time, in the course of their business by using the Occasional Importer Scheme.

The importer must seek approval to use the scheme by completing form C&E 1165, which in effect acts as an application and authorisation to use the scheme.

All occasional importers are required to inform the issuing office, within four working days of receiving the goods by returning Copy 3 of the C&E 1165.

Where a form is issued but not submitted within a reasonable time scale, issuing officers are required to contact the person, and steps should be taken to establish the circumstances and retrieve the form together with any outstanding excise duty and/or UK VAT.

Regulation 36 of the VAT Regulations requires that where non-taxable persons acquire excise goods for use in their business in the UK, they must notify HMRC at the time of acquisition or the time of arrival of the goods, whichever is the later.

It also describes what information is required on the notification. The VAT due on the acquisition must be paid when notification is made.

Where a person who is not registered for VAT fails to pay the UK VAT, HMRC have the power to make and notify an assessment of the amount due under Section 75 VAT Act 1994, Assessments in cases of acquisitions of certain goods by non-taxable persons.

An assessment made under the above section must be made within the time limits provided for in Section 77 VATA.

Most VAT assessments are notified automatically following input of form VAT641, but this is only possible if the person is VAT registered. In other circumstances the persons are not VAT registered and thus their details will not be held on the VAT mainframe. Any assessment must therefore be made manually using an assessment letter.

It is also important to ensure that such debts are not notified to debt management, by completion of form VAT641.

Therefore, to ensure that recovery action is taken where appropriate, these debts must be notified manually to the appropriate Debt Management Unit (DMU).

In these circumstances Regional Accounting Centre should use the National Office facility on DTR to determine which DMU the trader is schemed to. This will ensure that the correct DMU is notified of any debt.