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HMRC internal manual

Excise Assessments Interim Guidance

Protective assessments: overview

Protective assessments should not be regarded as different or special. They are normal assessments which are made in particular circumstances, usually those case involving lengthy and protracted litigation.

They are the means by which HMRC can comply with normal assessment time limits and protects HMRC in the event of ongoing litigation.

By issuing such assessments within the normal timescales, but not seeking to enforce them, until such time as the matter in dispute is found to be in our favour, HMRC have sought to strike a reasonable balance that protects them without imposing a financial burden.

Should the outcome be ruled not to be in the favour of HMRC, such assessments would be withdrawn.

There have been cases where a business, having been unsuccessful at the First-tier Tribunal, decides to take their case to the Upper Tribunal.

The Upper Tribunal then rules in favour of the business at which point HMRC may decide to lodge an appeal to a higher court in the hope of having the earlier judgement overturned.

The outcome is by no means certain, the higher court may or may not find in favour of HMRC. In any event, the intervening period between the judgements can be lengthy and could take a number of years.

If HMRC waited for the final outcome before issuing assessments, it would mean that in the event of HMRC succeeding in the higher court, we may be restricted from issuing any assessments due to the time limits.

Remember a court judgement does not itself constitute a new set of facts.

The table below outlines the high level basic sequence of events.

Step Typical Sequence of Events
1 First-tier Tribunal or Upper Tribunal finds in favour of HMRC. The trader is granted leave to appeal to a higher court
2 Higher court overturns the lower court’s judgement in favour of the trader
3 HMRC may decide to seek leave to appeal the decision. (At this point, the ‘law of the day’ is in the trader’s favour but HMRC will not withdraw existing assessments and must consider at this stage the need to issue more assessments to ‘protect’ against further revenue loss, in anticipation of lengthy litigation even though it is not appropriate to enforce payment of such protectve assessments while HMRC dispute the ‘law of the day’ on appeal)

Note: A First-tier Tribunal ruling is only binding on the parties involved in the appeal.