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HMRC internal manual

VAT Assessments and Error Correction

Power of assessment: Best judgement: General principles for calculating arrears

There is no single or ideal method of calculating arrears which give rise to a best judgement assessment in any particular set of circumstances.

The nature of the business and the records maintained will usually provide the best indication of the method that will give rise to the best result at the most efficient cost to HMRC.

It is important to remember that best result does not mean the method which produces the highest arrears. By best we mean the most reasonable method as it appears to the officer given the circumstances encountered and the information held.

Assessments based on one method and confirmed or supported by means of another are to be preferred.

Remember that the best judgement test applies to the specific assessment in question not any other assessment that you could have made.

If retrospective use of a different representative period or method would have achieved a better result or different arrears this should not upset the assessment on the grounds of best judgement, as long as the representative period or method you did use was reasonable.

Although the outcome of a tribunal hearing does not set a precedent, for some guidance on what the tribunal looks for and where appeals have been successful or otherwise, see

  • using observations to calculate arrears, VAEC1470 
  • using invigilation to calculate arrears, VAEC1480 
  • using mark up to calculate arrears, VAEC1490, and
  • other methods used to calculate arrears, VAEC1500.