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HMRC internal manual

VAT Assessments and Error Correction

HM Revenue & Customs
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Powers of assessment: VAT assessment powers: The law supporting time limits

Time limits for assessments under Section 73(1) and 73(2) VATA94

The rules governing time limits are the same whether an assessment under Section 73 is

  • For a net under-declaration you have discovered on a VAT return
  • A prime assessment raised manually, or automatically by the central computer, because a business has failed to render a return, or
  • An additional assessment following an earlier prime assessment, see VAEC2100.

There are time limits to consider when determining the date by which an assessment must be made although HMRC rely on the date of notification as the material date for time limit purposes, see VAEC1120.

The normal time limits for assessing are contained in VATA94 section 73(6). They are:

‘2 years after the end of the prescribed accounting period; or

One year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge.’

These are commonly known as the ‘two’ and ‘one’ year rules. The two year rule is the standard rule that is used.

With effect from 19t h March 08, assessments raised under Section 73(2) have an amended two year time limit start date.

In the case of an assessment under this subsection, the relevant prescribed accounting period is the prescribed accounting period in which the repayment or refund of VAT, or the VAT credit, was paid or credited.

NOTE: The four and twenty year capping restrictions described at VAEC1140 must always be considered when you are assessing under the one year evidence of facts rule.