Value Added Tax Act 1994 section 77A

Joint and several liability of traders in supply chain where tax unpaid

Section 77A allows HMRC to hold a trader jointly and severally liable for unpaid VAT in a supply chain involving specified electronic goods and services, where that trader knew or had reasonable grounds to suspect the VAT would go unpaid.

• The section targets supplies of telephones, computers, satellite navigation devices, consumer electronics, and related parts, accessories and software — and "goods" for these purposes also includes services
• Where a taxable person receives a supply of these goods and knew or had reasonable grounds to suspect that VAT on that supply, or on any earlier or later supply of the same goods, would go unpaid, HMRC may serve a notice making that person jointly and severally liable for the unpaid VAT alongside the person originally liable
• A person is presumed to have had reasonable grounds for suspicion if they paid less than the lowest price reasonably expected on the open market, or less than the price on any previous supply of those goods — though this presumption can be rebutted by proving the low price was unconnected with any failure to pay VAT
• The amount of unpaid VAT for which liability arises is the lower of the VAT chargeable on the supply and the amount shown as due on the supplier's return (plus any assessed amount), and VAT only counts as unpaid to the extent it exceeds any refund due