Q. I have recently become aware that one of my employees has been selling my stock and pocketing the cash. As the money has never gone in the till, do I have to account for VAT on it?
A. The VAT treatment depends on whether or not you've actually supplied the goods, what happened to them, who was responsible for them at the time and if you've issued a VAT invoice.
Generally, where goods are stolen, no supply is made by the business, and so no output tax is due. However, where goods have been sold and cash is stolen, the goods have been supplied and so output tax remains due on the sales.
In your situation, where goods have been sold by your employee from the business premises, supplies would be seen to have been made so you would have to account for VAT on those supplies.
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. An exception to this would be if you could satisfy HMRC that there has been collusion between the employee and the customer with the intention of depriving the business of the consideration. In that case HMRC may accept that there has been a theft of goods.
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