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HMRC internal manual

VAT Assessments and Error Correction

Protective assessments: Action for returns submitted after adverse judgement

HMRC may decide to continue to litigate and challenge the judgement. On the assumption that we may eventually be successful, you should consider the need to protectively assess any future returns subject to any overriding instruction from the policy team responsible for the lead case.

Once a VAT return has been processed issue a letter, and file a copy of the letter in the trader’s folder. See specimen letters VAT(LC)30: Protective Assessment - sect 73(1) and VAT(LC)31: Protective Assessment - sect 73(2), which are available on SEES.

Litigation can be lengthy so consider the need to periodically make further assessments on future returns.

If appropriate calculate default interest manually. For guidance on default interest see the VAT Default Interest Manual (VDIM).

Complete and process a VAT 641 but do not issue the VAT655 to the trader. Write on the VAT641 ‘FOR ACCOUNTING PURPOSES ONLY DO NOT ISSUE OUTPUTS’.

Immediately set the appeals indicator to ensure that the debt is not enforced or set off against any payments due to the trader.

If you are making a Section 73(2) recovery assessment you will need to issue both a preferred protective assessment and a protective assessment in the alternative. See specimen letter VAT(LC)31: Protective Assessment - sect 73(2), which is available on SEES.

A VAT641 should be completed as above only in respect of the preferred protective assessment. The need for alternative Section 73(2) assessments is explained at VAEC4070.

If we ultimately lose in the litigation process then, subject to prior confirmation by the relevant Policy Team, any previously notified protective assessments should be reduced or withdrawn as normal.

Protective assessments should not be withdrawn if litigation in the related lead case continues.

A local record should be kept of all protective assessments to ensure effective recovery or withdrawal action in the event that HMRC win or lose the appeal.

It is important that protective assessments are recovered at the earliest opportunity in the event that HMRC are successful in the litigation process.

Due regard should be given to any HMRC guidance issued by the relevant Policy Team which may give specific advice or instruction.