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HMRC internal manual

VAT Assessments and Error Correction

Section 73(1) and 73(2) assessments: Establishing the basis for assessment

The basis for an assessment is likely to fall into cases where there is clear evidence of an under-declaration and also those cases where there has been an element of presumption in arriving at the amount to be assessed.

Precise evidence

The following list gives some idea of the sort of assessment in this category

  • input tax disallowed or over claimed on invoices
  • output tax on specific invoices omitted
  • bad debt relief claims not allowed
  • unsatisfactory proof of export
  • liability errors
  • clerical or arithmetical errors.

In general, errors of this nature are precise and whilst there may be scope for disagreement over principles involved (especially in the liability area) the amount involved, provided it is calculated accurately, is not usually in contention.

Do not let assessments of this kind stop you from looking for presumptive errors.

Presumptive errors

Where you consider that the true amount of tax has not been declared (e.g. a credibility check reveals the likelihood of an error) you will have to consider undertaking an exercise to determine the true amount of tax.

You should consult with your line manager, as appropriate, if extra assurance time is needed

Do not be deterred by a shortage of trader’s records. The Court’s interpretation of best judgement has made it clear that an assessment is still acceptable even if the material on which it is based is limited.