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HMRC internal manual

VAT Assessments and Error Correction

Power of assessment: Evidence of fact: Twenty year assessments

To be able to make assessments under Section 77(4)(a) there are two parts to establishing evidence of fact.

Until you have obtained both, the one year clock will not have started to run. You will need to have

  • completed the necessary work to quantify the arrears, and
  • obtained evidence sufficient to demonstrate that the tax was lost as the result of dishonest conduct.

Recognising the one year rule under Section 73(6)(b), you have 12 months from the time this evidence came to our knowledge in which to make an assessment going back up to 20 years.


A business is on VAT accounting periods which end January, April, July and October. On an assurance visit dated 31 May 2006 the officer discovers that the business has under-declared output tax on a number of invoices proper to its final period ending 31 July 2003.

The officer establishes the quantum at the visit. The officer suspects that the arrears are due to fraud and that the business may have been evading VAT in earlier periods.

The case is referred for offence action. The quantum of tax and sufficient evidence of dishonesty in the earlier periods is obtained by 17 October 2006.

As evidence of quantum and dishonesty, the two ingredients required to make an assessment under Section 77(4)(a) have now been obtained, assessments going beyond 4 years can be made.

Because full evidence of fact was not obtained until 17 October 2006, the officer would have until 16 October 2007 in which to make the assessments.

It is important that in the course of the enquiries attention is still paid to the 12 month time limit for making the 4 year assessments on evidence of facts relating to quantum.

If, in the event, sufficient evidence of fraud or dishonesty is not subsequently found and offence action is abandoned, then you will be unable to assess back 20 years and will have to limit any assessments to 4 years.

There is a danger, that whilst trying to collect evidence to support a criminal or civil evasion case, periods may fall out of time to be assessed under the 4 year, or even 2 year rules.