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HMRC internal manual

VAT Joint and Several Liability

Introduction: Background to the Joint and Several Liability measure

Notice 726 Joint and several liability for unpaid VAT should be read in conjunction with this guidance.

The Joint and Several Liability (JSL) measure enables HMRC to recover one taxable person’s deliberately unpaid output tax from another taxable person, but only when that other taxable person is in the same supply chain and subject to certain conditions (discussed in JSL3000 and JSL4000).

In the April 2003 Budget, the Chancellor announced three new measures to combat VAT fraud:

  • joint and several liability in the supply of specified goods;
  • extended security; and
  • the invalid invoice measure.

JSL was specifically designed and introduced to tackle Missing Trader Intra-Community (MTIC) carousel fraud (this type of fraud is explained in detail in section VATF23500 of the VAT Fraud guidance manual).

Following a legal challenge by the Federation of Technological Industries (FTI), the European Court of Justice (ECJ) found in May 2006 that the extended security provision, in its then present format, was only lawful where JSL had been established.

However, the ECJ found that JSL was lawful and it remains one of a number of civil interventions that can be used when tackling VAT fraud.

In the March 2007 Budget, some changes were made to the legislation which extended the list of goods that JSL can be applied to (see JSL2100). Technological developments mean that electronic equipment is increasingly capable of a range of functions. The measure originally applied to mobile phones and computer chips but to take account of developments, the definition of telephones and computers was amended to include goods made or adapted for use as a telephone or computer.

In addition, the change also confirmed that positional determination devices for use with satellite navigation systems (commonly referred to as ‘satnavs’) fall within the definition of a computer for the purposes of the legislation.

Finally, the measure was extended to any other electronic equipment made or adapted for use by individuals for the purposes of leisure, amusement or entertainment and any other equipment made or adapted for use in connection with any such electronic equipment. This was to counter any shift in the type of goods used to perpetrate VAT fraud following the introduction of the reverse charge for specified goods on 1 June 2007 (see section VATF44200 of the VAT Fraud guidance manual and the Reverse Charge guidance manual). Those changes took effect from 1 May 2007.

Additionally, amendments were made in the 2007 Finance Bill to enable the ‘presumptions’ (JSL2250) to be extended or altered by way of secondary, rather than primary, legislation. Although no new presumptions have been introduced yet, this change was effective from 19 July 2007 (the date the 2007 Finance Bill received Royal Assent).