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HMRC internal manual

VAT Traders’ Records Manual

Other Invoicing arrangements for particular businesses: Cash and carry wholesalers: Description sufficient to identify the goods supplied

(i) Product coding

Because circumstances vary so much from one wholesaler to another it is neither practical, nor desirable, for us to impose a standard coding system, and cash and carry wholesalers should therefore devise their own codes. You must take the following into account when deciding whether a coding system is acceptable:

  1. a product coding system using a number of least two digits may be acceptable for the purpose of describing the goods, but three or more digits are considered more satisfactory, particularly where a wide range of products is sold.
  2. as far as possible, the codes should identify clearly definable classes of goods to limit the need for re-coding in the event of a change of rate affecting part of a group. Groups of products under the same code number should be of a very similar type, but the same code number must not describe goods subject to different rates of tax. In addition, the codes should not normally be allocated to groups that cover individual products that have widely differing mark-ups. For example, a single code should not be allocated to beer, wines and spirits.
  3. coding systems should be examined to confirm that they are acceptable for the purpose of describing the goods. You should exercise discretion in deciding what constitutes adequate coding in the circumstances of a particular trader.

(ii) Issue of product code lists

It is essential that every customer receiving goods by coded invoice is supplied with a product code list that he must keep and make available for inspection by HMRC. Suppliers must issue new code lists, bearing the date when they become operative, whenever the coding is changed; the lists should preferably be sent to customers, but whatever system is used it is vital that customers possess complete and up to date coding information.