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HMRC internal manual

VAT Assessments and Error Correction

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HM Revenue & Customs
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Power of assessment: Best judgement: Calculating arrears using invigilation

The following are examples of how officers have used invigilation to calculate arrears.

Example 1

One day of covert external observations and test purchase was undertaken, together with an invigilation exercise for one period of trading when meal slips, invigilation sheets and cash were reconciled.

The business had been closed for two hours during the invigilation. The tribunal was satisfied that the invigilation day was representative

Extrapolation of the invigilation takings to include an assumed amount for the period of closure revealed a lower suppression rate on the average for the day.

The lower rate was applied for the purpose of the assessment. The tribunal found that the officer’s approach had been methodical and upheld the assessment. Case Phoung Dhoung Jimmy Lee t/a Jumbo Express - MAN/95/1126.

Example 2

The officer undertook two days of invigilation, both of which indicated trading significantly higher than that declared. The business was unable to provide an explanation for the discrepancy.

Suppression of purchases was also identified and potato supplier’s records obtained. The assessment was based entirely on the invigilation exercise.

The assessment was upheld by the tribunal on the grounds that the officer had little alternative other than to assess in the manner in which he did. Case Kamaljit Kaur and Narinder Singh t/a Andy’s Fish Bar - MAN/96/772.