VAEC1341 - Power of assessment: Evidence of fact: Tax cases defining sufficient

In the case of Pegasus Birds Ltd, [1999] STC 95, the Appellant claimed that assessments had been made out of time, as HMRC had been in possession of some of the information for more than one year.

In considering whether the assessments in Pegasus Birds had been made within the one year time limit, Dyson J applied the following legal principles

  • The ‘Commissioners’ opinion referred in Section 73(6)(b) is an opinion as to whether they have evidence of facts sufficient to justify the making of the assessment. Evidence is the means by which facts are proved.
  • The evidence in question must be sufficient to justify the making of the assessment in question.
  • The knowledge referred to in Section 73(6)(b) is actual, and not constructive knowledge. In this context, constructive knowledge means knowledge of evidence which the Commissioners do not in fact have, but which they could and would have if they had taken the necessary steps to acquire it.
  • The correct approach for a Tribunal to adopt is
  • to decide what were the facts which, in the opinion of the officer making the assessment on behalf of the Commissioners, justified the making of the assessment, and
  • to determine when the last piece of evidence of these facts of sufficient weight to justify the making of the assessment was communicated to the Commissioners. The period of one year runs from that date.
  • An officer’s decision that the evidence of which he has knowledge is insufficient to justify making an assessment, and accordingly, his failure to make an earlier assessment, can only be challenged on Wednesbury principles, or principles analogous to Wednesbury.
  • The burden is on the taxpayer to show that the assessment was made outside the time limit specified in Section 73(6)(b) of VATA.​​​​​​​

The above legal principles were reaffirmed by the Supreme Court in DCM (Optical Holdings) Ltd [2022] UKSC [26].