Sale of Goods By Employees

I run a small retail shop and have recently discovered that two employees were selling goods out of sight of the security cameras and have been pocketing the cash. As the money has never gone into the till, do I have to account for VAT on it?

1st November 2008

The liability to account for VAT depends on whether a supply has been made. When goods are stolen, no supply is made by the business, and so no output tax is due.

In the situation you have, where goods have been sold by employees from business premises, and cash is stolen, the goods are deemed to have been supplied and so output tax remains due on the sales. If the employee sold the goods at a lower price and put that amount in the till, that would be the consideration on which VAT is due.

One exception is that if you can satisfy the HMRC that there has been an agreement between the employee and the customer with the intention of depriving the business of the money then they will usually accept that there has been a theft of goods.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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