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HMRC internal manual

VAT Assessments and Error Correction

HM Revenue & Customs
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Power of assessment: Best judgement: Consistency with direct taxes assessments

In the past where assessments were raised by Customs and Excise officers for indirect taxes, little or no consideration was required to ensure that any corresponding assessments raised for direct taxes reflected the full information gained from, or provided by, the trader.

This meant that in some cases, usually involving civil or criminal evasion, the basis for an indirect taxes assessment could vary significantly to the basis for a direct taxes assessment.

As both departments were separate such anomalies could be explained by reference to the different laws applicable to direct and indirect tax.

Since both departments have merged to form HMRC anomalies of this nature are no longer acceptable and raising assessments based on, for example, different rates of suppression should be avoided.

Assessing officers must therefore ensure, if necessary through formal liaison with their direct taxes colleagues, that their assessments reflect the full information obtained from the trader, regardless of the source of the information, and the basis of their assessment is consistent with the basis of any corresponding direct tax assessment.

Where however, a trader provided a direct taxes officer with different or additional material information that does not affect the original basis of the VAT assessment, we should resist any attempt by the trader to contest the assessment on best judgement grounds.

Guidance on cross tax referrals can be found on the Compliance & Enforcement Programme Homepage.