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HMRC internal manual

VAT Assessments and Error Correction

VAT assessments: types of assessment: protective assessments: about protective assessments

What is a protective assessment?

There is no legal distinction between a protective assessment and any other assessment, although the term ‘protective’ has been used by the courts.

A protective assessment is an assessment made to protect tax while litigation continues. Unlike other assessments it will only be enforced if the litigation is ultimately decided in HMRC’s favour. If the ultimate outcome goes against HMRC it will be withdrawn.

Protective assessments can be raised under the normal assessment provisions (Sections 73(1), 73(2) and 80(4A) of VATA 1994) and like all assessments, must be made to best judgement.

In Courts plc v Customs and Excise (Court of Appeal EWCA Civ 1527) it was held that an assessment which is made to protect HMRC’s position in the event of a subsequent appeal being decided in their favour, is nonetheless an assessment made to best judgement.

Assessments raised to avoid going out of time

An assessment raised solely because the time limit for assessing is imminent is not a protective assessment. Assessments raised in such circumstances are simply normal assessments and should be enforced in the normal way. Like all assessments they are subject to the best judgement requirements.

If you wish to raise an assessment because the time limit is approaching then you need to consider the usual rules for assessments. In particular, there is guidance on best judgement at VAEC1400.

More detail on why we make protective assessments and when we should make them is contained in the following pages of this section.