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HMRC internal manual

VAT Assessments and Error Correction

Powers of assessment: VAT assessment powers: The law relating to VAT assessments

All earlier Finance Acts and VAT Acts are now consolidated in the VAT Act 1994 (VATA).

Our power to assess tax is contained in VATA 1994, Section 73 and officers assessments are usually made under subsections 1 and 2 of S73.

VAT assessments are provided for in the VATA as a means of establishing a debt. Assessments made and notified under VATA 1994, S73 must relate to prescribed accounting periods.

Where a return is missing, incorrect or incomplete, we are afforded discretionary powers to assess for tax under the terms of Section 73 of the VAT Act 1994, where the key words ‘may assess’ are used.

Whilst the norm must be to assess for tax as envisaged by the legislation, we must be prepared to recognise the exceptional circumstances where it would be unreasonable to do so.

Where we consider that there are grounds for exercising this discretion you should remember that as a matter of policy, the exercise of this discretion is always dealt with as if it were extra statutory either as a class or individual concession with appropriate management authority required.

Other legal powers of assessment can be found at VAEC1112.