Value Added Tax Act 1994 section 18E

Deficiency in fiscally warehoused goods

Section 18E deals with the VAT consequences when goods held under a fiscal warehousing regime are found to be missing or deficient before they are lawfully removed from the warehouse.

• If goods in a fiscal warehouse are found missing or short before lawful removal, the warehousekeeper may be required to pay the VAT that would have been due on those goods immediately
• No VAT is payable if the warehousekeeper can demonstrate to HMRC's satisfaction that the loss is due to natural waste or another legitimate cause
• The VAT is calculated as though the missing or deficient goods had been supplied at open market value immediately before the absence arose or the deficiency occurred
• If the timing of the loss cannot be established, the VAT is calculated using whichever produces the higher amount: the highest open market value during the warehousing period, or the highest VAT rate during that period applied to the highest open market value while that rate was in force