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HMRC internal manual

Excise Assessments Interim Guidance

Evidence of fact: meaning of sufficient

Sufficient evidence of facts, means that you have enough information to calculate your assessment to best judgement, see EAIG13000.

The one-year time limit will not necessarily begin to run simply from when

  • you knew something was wrong
  • a different office passed on information to you or a colleague which was not pursued
  • a previous officer knew something was wrong, or
  • HMRC had access to information. For example, during an audit visit you may study records that were available but not consulted during a previous visit. In this instance, the time limit of any assessment raised would not run from the date of the previous visit.

For example, if you or a different officer looked at the records of a business during an earlier visit and you have now identified errors, the one year time limit will not have begun if you still need additional information to justify your assessment.

However it is important to note that the relevant time is when the facts first become available to the officer who is making the assessment, and the lime limit does not begin to run simply when you know something is wrong but when you have sufficient information on which to base an assessment.

An example of this is in the VAT appeal case of Pegasus Birds Ltd, [1999] STC 95.

In the case of Pegasus Birds Ltd, [1999] STC 95, the Appellant claimed that assessments had been made out of time, as HMRC had been in possession of some of the information for more than one year.

In considering whether the assessments in Pegasus Birds had been made within the one year time limit, Dyson J applied the following legal principles

  • The HMRC opinion referred in Section 73(6)(b) is an opinion as to whether they have evidence of facts sufficient to justify the making of the assessment. Evidence is the means by which facts are proved.
  • The evidence in question must be sufficient to justify the making of the assessment in question.
  • The knowledge referred to in Section 73(6)(b) is actual, and not constructive knowledge. In this context, constructive knowledge means knowledge of evidence which HMRC do not in fact have, but which they could and would have if they had taken the necessary steps to acquire it.

The correct approach for a Tribunal to adopt is

  • to decide what were the facts which, in the opinion of the officer making the assessment on behalf of HMRC, justified the making of the assessment, and
  • to determine when the last piece of evidence of these facts of sufficient weight to justify the making of the assessment was communicated to HMRC. The period of one year runs from that date.
  • An officer’s decision that the evidence of which he has knowledge is insufficient to justify making an assessment, and accordingly, his failure to make an earlier assessment, can only be challenged on Wednesbury principles, or principles analogous to Wednesbury.
  • The burden is on the taxpayer to show that the assessment was made outside the time limit specified in Section 73(6)(b) of VATA.

Thus the one year evidence of facts clock starts to tick when you have received the last piece of evidence that enables you to make the assessment, which you are now making to best judgement.

Therefore you must ask yourself upon making the assessment, did I (or another officer) receive the material information on which I am basing this assessment within the last 12 months. If the answer is no, you cannot make an assessment under the one year rule.