Hi
If certain items in stock over £50 each get damaged or faulty when bought and therefore cannot be sold, and hence written off as stock losses, what is the position with VAT? HMRC guidance says that you do not worry about vat if stock losses are reported to the insurance company but the client wouldn't make a claim for small value items. The client doesn't want HMRC to say that vat must be charged.thanks.
Replies (10)
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No VAT to account for
As VAT is only due on the consideration received for the making of taxable supplies - no VAT can be due as there is neither a supply nor a consideration.
If you have purchased stock and sent it back due to faults, and got a credit note, then the VAT on the credit note must be declared (and paid back) to HMRC. If you just throw it away, there;d be no adjustment - but I would keep a record of every item, so that you could support any questions, in the event of an investigation. You could even show that stock write off, as a separate line in cost of goods sold.
20%
If you get nothing for them, that's the value you need to account for VAT on.
20% of nothing is nothing.
There's no problem here.
The C word
Really troubles me when mentioned by a person that needs to ask this sort of question.
Interesting turn of phrase
".... you do not worry about VAT ....."
I'm sure that only paraphrases the official guidance.
If there are no proceeds received on the scrapping of the stock there is nothing to charge VAT on? So what is the issue?
Gifts?
If it is a gift it is a supply as ownership has passed - as you have scrapped the goods there is no supply - NO VAT