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HMRC internal manual

VAT Government and Public Bodies

HM Revenue & Customs
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Police authorities: specific activities: disposal of goods

Disposals under the Police (Property) Act

The Police (Property) Act 1897 (as amended) provides, amongst other things, for the disposal of goods whose owners cannot be traced. This can include lost property handed in at a police station, property recovered after the detection of a crime, abandoned vehicles and goods found on local authority property.

The special legal provisions that apply in cases where the police do not have legal title to the goods only affect the particular circumstances surrounding acquisition and disposal. In other words, they do not affect the nature of the supplies themselves which are of second-hand goods. In most cases disposal will be through auction houses or internet auction sites and are supplies made by way of business and liable to VAT at the appropriate rate.

The sale of police assets is similarly a business supply with the liability subject to the normal VAT rules.

Disposals made under the Proceeds of Crime Act

Where a convicted criminal has financially benefited from their crime the Court can impose a Confiscation Order (CO) under the Proceeds of Crime Act 2002. The CO is for a monetary amount and in most cases failure to pay can increase the length of any custodial sentence. Following the issue of a CO, assets may be sold by, or on behalf of, the defendant. Where assets are sold by a law enforcement agency in connection with a CO, VAT is not due from the agency on any income from the sale.

In effect the defendant is seen to be the owner of the asset and so any VAT liability rests with that person and not with any agency that has overseen the sale. If the defendant is VAT registered then any VAT liability will fall on the defendant’s VAT registration. The sale will also be subject to the normal VAT liability rules. In the unlikely event of an agency making a charge for their services in administering the disposal it is likely that this will be for a taxable supply to the defendant.