Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN60 VAT: joint and several liability

Who is likely to be affected?

1   Businesses trading in electronic goods, mobile phones, computers and related parts and accessories.

General description of the measure

2   A Treasury Order is to be made on 21 March 2007 to extend the list of goods to which section 77A of the Value Added Tax Act 1994 (joint and several liability) applies by adding certain electronic goods.

3   Legislation will also be introduced in Finance Bill 2007 providing a power to extend or amend the 'rebuttable presumption' (see paragraph 7 below) contained within section 77A.

Operative date

4   The extension of the list of goods to which section 77A applies will take effect from 1 May 2007. The power to amend the 'rebuttable presumption' will take effect from the date that Finance Bill 2007 receives Royal Assent.

Current law and proposed revisions

5   The joint and several liability provisions in section 77A of the VAT Act 1994 allow HMRC to direct that a VAT-registered business receiving goods listed in section 77A(1) from another VAT-registered business is jointly and severally liable for VAT if they had reasonable grounds to suspect that VAT would go unpaid elsewhere in the supply chain. At present the provisions apply to telephones, computers and their parts and accessories

6   The Treasury may, by Order, amend the list of goods contained in section 77A(1). Such an Order will extend the list of goods to which section 77A(1) applies. The further goods will be certain sorts of electronic equipment, of a kind ordinarily owned by individuals and used by them for the purposes of leisure, amusement or entertainment. The order also clarifies that satellite navigation systems (SatNavs) are included as computer equipment.

7   Section 77A(6) allows HMRC to presume that a business had reasonable grounds to suspect that VAT would go unpaid if they purchased specified goods for less than the open market value or less than the price payable for them by any previous supplier. That presumption is rebuttable on proof that the low price payable for the goods was due to circumstances unconnected with a failure to pay VAT. The Finance Bill 2007 amends section 77A by introducing a new section 77A(9A) and (9B). The new subsections will allow the Treasury to extend or otherwise alter the circumstances in which a person is presumed to have reasonable grounds for suspecting that VAT will go unpaid elsewhere in the supply chain.

Further advice

8   If you have any questions about this change, please contact the National Advice Service on 0845 010 9000. Information about Budget measures is available on the HM Revenue & Customs website at