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HMRC internal manual

VAT Accounting Manual

HM Revenue & Customs
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Use of estimation for completing VAT returns: legal basis for estimation

Under regulations 28 and 29(3) of the VAT Regulations 1995, HMRC may allow a trader to complete a VAT return on the basis of estimated, rather than exact figures. Regulation 28 defines the conditions under which estimation of output tax may be allowed.

Regulation 28. Where the Commissioners are satisfied that a person is not able to account for the exact amount of output tax chargeable in any period, he may estimate a part of his output tax for that period, provided that any such estimated amount shall be adjusted and exactly accounted for as VAT chargeable in the next prescribed accounting period or, if the exact amount is still not known and the Commissioners are satisfied that it could not with due diligence be ascertained, in the next but one prescribed accounting period.

Regulation 29(3) imposes the same conditions in respect of input tax. Both regulations give HMRC discretion to agree a method of estimation where the business is unable to work out the exact amount of input tax or output tax.