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HMRC internal manual

VAT Assessments and Error Correction

Power of assessment: Best judgement: Prime assessments

Where a trader fails to submit a VAT return HMRC have the power to make an assessment to the best of their judgement in order to establish a liability and create an enforceable debt for that period.

Such assessments, issued in the absence of a return are known as prime assessments, see VAEC2100.

Prime assessments, including those calculated and issued by the central computer system, are made under Section 73 (1) VATA 1994. This means that they are subject to the same legal rules on best judgement as any other assessments made under Section 73 (1) VATA 1994.

Guidance on how centrally issued assessments are calculated is set out in VAEC2140.

If you are aware that the amount of an assessment due to be calculated by the central computer is likely to be too high or low, you must take action to stop the assessment being made and notified. If you do not, the prime assessment will not be to best judgement.

For example; In the case of a compulsory registration you may be aware from a recent visit of the actual tax liability, at least for part of the first period.

If the first period return is not submitted the centrally calculated assessment will not take account of that information and therefore cannot be said to have been made to best judgement.

Issuing an additional assessment to top up the prime assessment is not acceptable if you already held the information at the time the prime assessment was made.

For guidance on how to inhibit the central assessment, see VAEC2150. An assessment accurately reflecting the business’s true liability can then be made and issued.