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HMRC internal manual

VAT Assessments and Error Correction

HM Revenue & Customs
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Power of assessment: Evidence of fact: Definition of comes to their knowledge

Only the assessing VAT officer can say when the necessary evidence was obtained, that is, when the facts became known.

Knowledge in this context refers to actual knowledge, not what has been referred to as constructive knowledge. It is the actual facts known to HMRC that are pertinent, not what they could have, or ought to have found out.

The fact that the information was available during an assurance visit, but the officer failed to recognise the significance of the information, does not fulfil the requirements of the law.

We are protected in this viewpoint by the High Court decision in the appeal case Van Boeckel, QB Dec 1980 [1981] STC 290 and The Post Office, QB, May 1995 [1995] STC 749.

Note 1:

Section 73(6)(b) refers to the making of the assessment. The clock starts ticking under the one year rule when the last piece of material evidence comes to the attention of HMRC which justifies the raising of the assessment in question.

A business may argue that an assessment is out of time because evidence to justify an assessment was available to, received, or held by HMRC more than one year earlier.

However, the pertinent question is - ‘When did the last piece of information, that was critical to the assessment which was made, come to HMRC’s knowledge?’.

Note 2: Distinction between ‘received’ and ‘comes to the Commissioners ‘knowledge’

It is possible for an officer of HMRC to have received information, but such information may not necessarily have ‘come to the Commissioners’ knowledge’. This is particularly so where the trader is not subject to an ongoing VAT enquiry, or where the officer is not in a position to understand the meaning or consequence of the information.

If another officer received the material information earlier, but you are able to demonstrate that they could not reasonably have been in a position to have understood its relevance to the assessment which you are making, then the one year rule is unlikely to have been breached. Whether it has or not will depend on the facts of the case.

To reduce the risk of any dispute about when sufficient evidence has come to the Commissioners’ knowledge, you should ensure that assessments are made and notified to best judgement with minimum delay.

Note 3: Multi-officer generated enquiries/investigations leading to an assessment

We need to pay particular attention to multi-officer enquiries such as in cases of suspected fraud or deliberate behaviour.

Where more than one officer is making enquiries into a trader’s VAT affairs you need to be aware that the Courts consider all such officers to have a collective or global knowledge of the information supplied to, or obtained by HMRC in respect of the assessment.

You cannot rely on the assessing officer being unaware of a pertinent fact affecting the quantum or basis of the assessment, held by another officer involved in the enquiry, in order to justify extending the 12 months evidence of facts rule.