Commentary

V3.102A Where a supply does not occur

Part V3 Supplies, acquisitions and imports

V3.102A Where a supply does not occur

V3.102A Where a supply does not occur

No agreement for supply

It has been held1 that a supply [of goods] means 'the passing of possession of goods pursuant to an agreement whereunder the supplier agrees to part and the recipient agrees to take possession'.

Where goods are lost or destroyed prior to supply it is apparent that no taxable supply can take place. However, HMRC may require a person to account for goods acquired in the course or furtherance of his business and may assess him if he fails to prove that the goods have been or are available to be supplied, exported or otherwise removed from the UK, or lost or destroyed2.

In a Belgian case3, a quantity of cigarettes was stolen from a warehouse. The tax authorities demanded payment of the VAT (and excise duty) from the company which owned the warehouse. On appeal, the ECJ held that 'the theft of goods does not constitute a supply of goods for consideration within the meaning of Article 2 of the Sixth Directive4 … and therefore cannot as such be subject to Value Added Tax'. (The situation appears to be different in respect of VAT on the importation, rather than the supply, of goods5.) On the other hand, case law suggests that although no output tax liability arises, there may be a restriction in the amount of input tax incurred on the purchase of the stolen goods6. This is on the basis that, although Directive 2006/112/EC, art 185(2) provides that no

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