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HMRC internal manual

VAT Supplies in Warehouse and Fiscal Warehousing

Supplies of goods within a warehousing regime: Deficiencies of warehoused goods

Where deficiencies of imported goods are charged with duty, VAT not already paid on the imported goods must also be charged. Similarly, any acquisition VAT on goods from another member-state which has not been accounted for must be accounted for when deficiencies occur. Deficiencies of home-produced goods should not be charged with VAT unless the goods have been supplied in warehouse before the loss.

In each case, the VAT may be deducted as input tax, subject to the normal rules - see V1-13 Input Tax