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HMRC internal manual

VAT Assessments and Error Correction

Types of assessment: Prime assessment information: Computer calculations

As with any other Section 73(1) assessment, prime assessments calculated by the computer must meet the best judgement criteria, see VAEC1420.

The automatic computation is based on a defensible best judgement methodology, using two given formulae and analogue tables, without the need for resource intensive manual intervention.

The analogue tables, D1264, are produced monthly by computer. These tables are constructed by dividing all traders into a number of trader groups according to their type of business and then averaging the returns received from the traders in each group.

The results provide the basis for a reasonable estimate of tax due from a trader either by reference to

  • previous returns as in Formula 2, or
  • taxable turnover as in Formula 1.

Where the required historical data is available, Formula 2 is used in preference to Formula 1 as it generally gives a more realistic assessment.

To see how the computer calculates