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HMRC internal manual

VAT Assessments and Error Correction

Powers of assessment: VAT assessment powers: Assessments for deceased traders time limits

The law on assessing for VAT due where a trader has died is contained in Section 77(5) VAT Act 1994.

The legislation states that an assessment cannot be made on a trader under any circumstances more than four years after the death of the trader.

The normal provisions of the one and two year rules in Section 73(6) VATA94 still apply throughout but in those instances where the deceased’s conduct falls within Section 77(4) the period to assess may go back four years from the date of death.

Section 77(4) applies where a taxpayer is liable to

  • a Section 67 penalty for failure to notify, or
  • a Section 60 penalty for VAT evasion, or
  • has been convicted of fraud in relation to VAT lost.

The reasoning behind Section 77(5)(b) is to enable understated tax to be assessed for up to four years prior to the date of death as long as the assessment is made within four years of the death, where the circumstances of Section 77(4) apply.

It should be emphasised that the one year evidence of fact rule in Section 73(6) should still be adhered to as it is not be replaced by Section 77(5). You must still asses within one year of evidence of facts regardless of any other capping issues.

For guidance on penalties, see