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HMRC internal manual

VAT Assessments and Error Correction

VAT assessments: types of assessment: protective assessments: what about further returns and claims

Action for returns submitted after a court decision against HMRC

Some businesses may not account for VAT in accordance with HMRC’s view of the law where a higher court has decided against us.

Where HMRC is appealing the judgment, or may do so, you should consider the need to make and notify protective assessments to recover any amounts under-declared on returns received from businesses applying the decision.  

Litigation can be lengthy so you should consider the need to periodically make further assessments on future returns. Remember the time limits for assessing: guidance on these is at VAEC1120 onwards.

Action for claims made after a court decision against HMRC

Where a decision goes against HMRC, we may get claims for over-declared output tax or under-claimed input tax from businesses as a result.

These claims may be from businesses who made claims at the same time as the main litigant and whose appeals are stayed behind (followers); or from businesses which feel that they are in the same position. 

Where the decision in question is a decision of the First-tier Tribunal, we will not invite, nor pay, claims. Claims should be rejected and the claimant invited to appeal.

However, where the claim is based on a declaratory judgment (see VAEC5520) we must credit the claim, subject to the usual verification and consideration of unjust enrichment.

Where HMRC is appealing the decision, or considering an appeal, we should protect ourselves against the possibility that the judgment might be overturned. Protective assessments should be made and notified when the claim is credited.

See also the guidance on recovery assessments at VAEC4000 and on claims in the VAT Refunds manual.