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HMRC internal manual

VAT Assessments and Error Correction

Types of assessment: Prime assessment information: Inhibit automatic issue of an assessment

A trader has a legal obligation to submit VAT returns. However, it should be recognised that there is a risk in pursuing a debtor into bankruptcy where part or all of the debt is made up of prime assessments.

Tax assessments issued by the computer may not always reflect the trader’s patterns of business, seasonal trading, etc. Prime assessments issued to such traders may be so inaccurate as to create a revenue risk.

Therefore, if the local office becomes aware that automatic prime assessments notified to a trader, who persistently fails to render returns, are too low or too high, manual intervention will be necessary.

In such cases a form VAT704 (Enforcement Suppression Indicator Amendment) should be input to prevent the automatic issue of the trader’s next prime assessment.

Input of the VAT704 will cause a Batch 58 action notice, see VAEC2210, to be produced at the main enforcement run for the trader’s next period should the return be missing.

This will enable the local office to make a manual prime assessment that will be more accurate. Once the assessment has been issued the enforcement suppression must be lifted, otherwise it will inhibit future assessments.

In all circumstances where the local office has specific information regarding a trader’s liability for any period, for example in the case of a compulsory registration, the VAT 704 action outlined above must be taken to stop an automatic assessment being notified.

Failure to do so will cause a prime assessment to be made which is not to best judgement as the automatic calculation will not take account of the information known to us.