Making and notifying assessments: when to assess
You should assess as soon as you have sufficient evidence to justify making an assessment. The few exceptions to this rule are as follows
When to assess; De minimis limit
You should not normally make an assessment when you discover an error where the error or the total value of the errors falls below the de minimis limit of £100. However, if the errors are persistent or it is felt that the issue needs to be exceptionally reinforced, you may assess irrespective of the de minimis limit. Where appropriate, you should advise the trader to adjust for errors below this limit in their records.
However, in those cases where there is persistent error, or where the issue need to be reinforced, an assessment can be made and notified irrespective of any de minimis limit.
When to assess: Accounting period not yet ended
You must not assess
- for an accounting period which has not yet ended (where an excise trader has fixed accounting periods)
- before the due date for a return unless the return has already been rendered, or
- unless a fully processed return or prime assessment is on file in the case of under-declarations.
When to assess: Seized goods
European law requires that once duty has become “chargeable” in a Member State (i.e. once there has been a duty point in UK terms) the national authorities must ensure that the duty is collected.
This may be by way of an assessment for the duty due, or, where goods have been seized, it could be a condition of restoring the goods that the duty on them is paid.
Where goods have been seized, and the general policy is not to offer restoration, HMRC will have to be able to justify why goods should not be restored where an assessment for the duty on them has been made and paid.
When to assess: Fraud investigation cases
It may not be appropriate to assess as soon as there is sufficient evidence if to do so would prejudice an investigation. Prior to taking assessment action in such cases, consult the case solicitor and/or Policy and ensure that authorisation is recorded at the appropriate level within Investigation to support not making the assessment at the earliest opportunity. It is essential that the matter is kept under constant review and an assessment is made within the prescribed time limits so that the ability to secure the revenue debt is not lost. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
When assessing for tax in fraud cases, you need to take extra caution. If eventually it is decided not to pursue fraud, your assessment must not extend beyond a maximum of four years.
As fraud investigations are often lengthy, it follows that periods might easily be lost if you delay in making an assessment. This might happen, for example, if cases referred for fraud action have been returned and not pursued.
If evidence of both the amounts assessed and dishonesty comes to your knowledge within one year, you can assess up to 20 years
If, on the other hand, you have only obtained evidence of the amounts to be assessed and you are approaching the 12 months evidence of fact time limit, but you have not yet secured sufficient evidence to demonstrate dishonesty; or the appropriate behaviour, you should assess to best judgement for those periods up to four years old.
If you fail to assess the earlier periods and you later find out you are unable to find evidence of dishonesty or behaviour you risk being out of time to assess periods under the four year rule. If such evidence is subsequently obtained, you will have one year from then to assess back 20 years for those periods which are over four years old.
Tax assessments should not normally be delayed pending the outcome of a criminal prosecution. However, should a decision be taken, supported by legal advice, to defer assessing a criminal case, resulting in periods falling out of time for assessment, the loss of revenue must be accounted for.
Such deferment should be exceptional and justified as normally assessments should be made without prejudice on a factual basis consistent with the prosecution, even if your legal advice is that recovery of the assessment should not occur until conclusion of the prosecution for fraud.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)