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HMRC internal manual

VAT Assessments and Error Correction

Recovery assessments: Section 73(7A) assessments- VAT assessments on fiscal warehousekeepers

VAT due - liability guidance

See guidance VWRHS - supplies in warehouse and fiscal warehousing and Notice 702/8 Fiscal warehousing.

VAT due - the power to assess

Section 73(7A) VATA 1994 provides for assessment of VAT due from a fiscal warehousekeeper where that person has failed to pay VAT required under section 18E(2) due to deficiencies in warehouse.

Section 73(7A) only refers to a “fiscal warehousekeeper”. VAT legislation makes a clear distinction between a fiscal warehousekeeper and other categories of warehousekeeper, as well as between a warehouse and a fiscal warehouse; for example, section 73(7B) refers to removal of goods “from a warehouse or fiscal warehouse”. The fiscal warehouse regime is contained in sections 18A to 18F VATA 1994 and Schedule 5A VATA 1994. Under section 18B, it applies to “eligible goods”, which are defined in section 18B(6) as goods “of a description falling within Schedule 5A”. The goods listed in Schedule 5A VATA 1994 do not include alcoholic beverages. Further detailed fiscal warehouse requirements are contained in regulations 145A to 145J of the VAT Regulations 1995 (SI 1995/2518).

Where, before being lawfully removed, such goods subject to a fiscal warehousing regime are found to be missing or deficient then - unless satisfied that the discrepancy is due to natural wastage or other legitimate cause - HMRC may assess to the best of their judgment the fiscal warehousekeeper for VAT that would have been chargeable.

Section 73(7A) was specifically added to section 73 to deal with non-payment of VAT where goods that have been subject to a fiscal warehousing regime, are found to be missing or deficient before being lawfully removed from the fiscal warehouse. In contrast, section 73(1) applies to all taxable persons and covers failure to make VAT returns and the submission of incomplete or incorrect returns, but only where there has also been a taxable supply made within the UK. Where specific and appropriate assessment powers are available to HMRC under section 73(7A), it is more appropriate for HMRC to use these assessment powers.

An assessment is a means of seeking payment from a person on whom a liability falls; the assessment does not create the liability, but merely demands fulfilment of that person’s obligation under the legislation concerned. Section 73(7A) permits HMRC to assess, to the best of their judgment, the amount of VAT due.

Consider a Penalty

See Compliance Handbook for guidance.

Assessment notification process

Section 73(7A) assessments must be notified by SEES letter VAT(LC)53: S73(7A) VAT assessment: deficiencies in fiscal warehouse. Accounting for the VAT on these assessments is done through Cumbernauld Accounting team. The assessment and payment must not be placed on the VAT mainframe. Therefore, the VAT 641 mainframe assessment procedure is not appropriate for section 73(7A) assessments. Form EX601 should not be used to make and notify VAT assessments.

Take the following action:

Assessment notification letter

Contact Cumbernauld Accounting Team on 03000 583774 to obtain an assessment reference number in the format VEXA/Consecutive Number/Year. This reference number must be quoted on the letter and in all future correspondence.

Prepare an original and three copies of the assessment letter VAT(LC)53: S73(7A) VAT assessment: deficiencies in fiscal warehouse, available on SEES.

Distribute the SEES letters as follows;

  • Original and Copy 1: Send to the trader
  • Copy 2: Using internal mail, send copy 2 of the assessment letter and the associated EX601 form to: Cumbernauld Accounting Team, St Mungo’s Rd, Cumbernauld, G67 1YZ, and include reference to this guidance page (VAEC5101)
  • Copy 3: Scan/capture to HMRC’s records for the fiscal warehousekeeper

Accounting team

On receipt of payment, bring to account. Time to pay requests should be referred to Cumbernauld Accounting Team, St Mungo’s Rd, Cumbernauld, G67 1YZ. If the trader does not pay within 30 days of the demand letter, refer the case to the Excise, Environmental and Customs Duties (EECD) team at the National Debt Pursuit Unit in Liverpool.

Consider fraud

If you consider fraud is an issue, before demanding payment, complete form ROST A and send via your Senior Officer to the Regional Referral Team.