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HMRC internal manual

Insurance Premium Tax

Assessments: legal provisions

An assessment may be required to correct an underpayment or overpayment of IPT, or errors in the treatment of credits (either overclaims or underclaims). Our powers to assess are dealt with in section 56 of the Finance Act 1994.

Section 56(1) states:

In cases where

(a) a person has failed to make any returns required to be made under this Part,

(b) a person has failed to keep any documents necessary to verify returns required to be made under this Part,

(c) a person has failed to afford the facilities necessary to verify returns required to be made under this Part, or

(d) it appears to the Commissioners that returns required to be made by a person under this part are incomplete or incorrect,

the Commissioners may assess the amount of tax due from the person concerned to the best of their judgement and notify it to him.  
   

Section 56(2) states:

Where a person has for an accounting period been paid an amount to which he purports to be entitled under regulations made under section 55 above [the credit provisions], then, to the extent that the amount ought not to have been paid or would not have been paid had the facts been known or been as they later turn out to be, the Commissioners may assess the amount as being tax due from him for that period and notify it to him accordingly.
 

Section 56(3) states:

Where a person is assessed under subsections (1) and (2) above in respect of the same accounting period the assessments may be combined and notified to him as one assessment.
 

Where a person is assessed under subsections (1) and (2) above in respect of the same accounting period the assessments may be combined and notified to him as one assessment.

Subsection (4) extends our powers to assess to cover all those people who might be required to make a return on another person’s behalf. It covers personal representatives, trustees in bankruptcy or sequestration, receivers, liquidators or other representatives.

Taken together these provisions give us powers to assess:

* where returns are not made section 56 (1)(a)
   
* where they cannot be verified (and we believe they are wrong) section 56(1)(b)
* where we are not given the opportunity to verify them section 56(1)(c)
* where returns are incorrect section 56(1)(d)
* where claims to credit are incorrect. section 56(2)

There are two types of assessments which might be made against an insurer: central assessments and officer’s assessments. In addition, liability notices can be issued to the insured.