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HMRC internal manual

VAT Assessments and Error Correction

HM Revenue & Customs
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Power of assessment: Best judgement: Some remedies for invalid assessments

In certain circumstances the error in the making of an invalid assessment can be remedied and a fresh valid assessment made, providing the correct assessment is made within the same legal time limits which applied to the first assessment. In such circumstances invalid assessments should be withdrawn.

Examples of situations where the following invalid assessments can be rectified in this way are as follows

  • when an assessment was not made to best judgement but we are still in time to assess under the time limit rules, see VAEC1140
  • when an assessment is made in respect of the wrong accounting period
  • when a bulk period assessment, that is an assessment covering more than one accounting period, has been made which includes out of time accounting periods, or
  • when the reason for raising the assessment changes.

In cases of doubt or difficulty, before you raise an assessment, please refer to VAEC3740 on alternative assessments.

Errors solely in notification do not make an assessment invalid. The can be rectified by correctly notifying the assessment.

It is recommended that when advising a trader of the correct notification or where you have made a fresh assessment you should also send separate letter of explanation to remove any doubts or confusion by the trader.

If however you feel this may be contentious, you are advised to contact Central Policy TAA, see VAEC0150.

In the case of BUPA Purchasing Ltd the court of appeal held that an assessment can be maintained for a reason other than the reason originally notified.

This judgement was, however, limited in that it;

  • does not allow you to increase the amount assessed, and
  • applies only where the assessed liability relates to the same transactions or series of transactions.

We would not attempt to uphold a change of basis where it would be unreasonable in the public law sense for us to do so or in circumstances where it would be obviously unfair on the taxpayer.

You should therefore as a matter of best practice withdraw the first assessment and issue a fresh assessment provided time limits allow you to do so.

Where however time limits under Section 73(6) or Section 77(1) VATA 1994 prevent you issuing a fresh assessment you are advised to consider if the BUPA Court of Appeal principles apply and whether the assessment should be maintained albeit for different reasons.

If however you are in doubt about this, you are advised to contact Central Policy TAA, see VAEC0150.