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HMRC internal manual

VAT Assessments and Error Correction

General assessment procedures: Pre-assessment letter

In 1996, following a recommendation from Revenue Law Review Committee, supported by the Solicitor’s Office, the practise of issuing a letter prior to assessment was introduced as an important element in the assessment process.

The letter has become known as the pre- assessment letter but has also been referred to as the letter of request or letter of intent to assess. The letter does not need to be issued if there is already agreement to the proposed assessment, or the assessment will relate to - for example - a simple single posting error or an imminent assessment time limit is approaching.

The letter always precedes the making of an assessment. The issue of a pre-assessment letter is now one of the key principles outlined in the procedure for making and notifying assessments.

The aim of the letter is to provide clarity for businesses and to reduce the number of unnecessary tribunal appeals, particularly in contentious, or complex, cases where assessments were being questioned on the grounds of best judgement, see VAEC1400, so saving litigation costs for both the business and HMRC.

The letter has a number of advantages in that it

  • gives businesses time to consider and understand the details of an assessment before it is made
  • allows businesses to provide further evidence or information which may lead you to amend the basis of the intended assessment
  • demonstrates the exercise of reasonableness when considering an assessment so helping complex assessments pass the best judgement test
  • helps the business to get its VAT declarations right in the future and
  • ensures that we comply with our responsibility under the Freedom of Information Act to explain the reasons for your decisions

Currently, unnecessary time can be wasted by local offices, Solicitors Office and the tribunal in establishing the exact grounds for an appeal.

Knowledge of the grounds of appeal is a vital prerequisite to both understanding the nature of any dispute and preparing an effective counter argument. If an appeal is lodged the letter will help form the basis of HMRC’s case when instructing solicitors.