Basic interventions: matters to consider when determining whether to use a civil intervention: assessments and penalties: particular issues to consider when raising an assessment: assessment time limits
Guidance on time limits can be found in
- VAEC7400; and
Points to consider when making an assessment where there is a connection with fraud
Essentially there are two time limit constraints that you must work to when making an assessment:
- limitation on how far back you can go in terms of the VAT accounting periods that may be assessed;
- constraints on how long you have in which to raise an assessment once you have obtained sufficient evidence.
It is only in relation to a) above (i.e. how far back you can go) that a longer period of time is available in cases involving deliberate VAT loss or knowing participation in transactions intended to bring about VAT loss. In such cases, the normal period of 4 years (VAT Act 1994, section 77(1)) is extended to 20 years (VAT Act 1994, section 77(4)).
It is important to remember that the rules relating to b) above (i.e. how long you have in which to raise an assessment after obtaining the evidence) remain the same as for any type of VAT assessment - there is no additional time allowed for cases connected with fraud.
The one year ‘evidence of facts’ rule
Section 73(6)(b) VATA allows you, the decision making officer, to make an assessment up to one year after evidence of facts, see VAEC1300, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to the attention of HMRC.
Please note that the assessment will be out of time under the one year rule if the last piece of evidence which you are relying on to make the assessment came to either your attention OR the attention of another officer within HMRC more than one year prior to making the assessment.
In light of the above it is therefore vital that you keep a close eye on when the last piece of evidence, which you are relying on to make an assessment, came to the attention of HMRC. In a VAT fraud case this is likely to involve evidence relating to other traders in your trader’s transactions chains. For evidence to be relevant for the purposes of the one year rule it must be evidence that you relied upon to make your decision and should not include evidence that was received after you had already reached the decision to assess (e.g. evidence received subsequently that may have strengthened your case but did not play a part in your original decision to assess).
Please also be aware that this situation could be somewhat fluid as it may be that after further investigation or consideration a decision will be made not to assess certain deals, therefore these deals will not be part of the assessment and any evidence in connection with these deals will not impact on the one year rule.
You will also need to consider the one year rule when seeking further information from the trader. There may be circumstances where the trader either delays in responding to, or refuses to respond to, HMRC queries - here you will need to ensure that if you already have enough information to assess then you do not miss the time limit. Furthermore, asking the trader for confirmation of evidence that HMRC already holds will not assist HMRC in staying within the one year rule.
If you are in a position where you have sufficient evidence to assess in relation to a significant proportion of the transactions under consideration, but still need further evidence in relation to the remaining transactions, it will usually be preferable to issue your assessment in relation to the transactions for which you do hold sufficient evidence. This will safeguard HMRC’s position under the one year rule in relation to those transactions, should it transpire that the remaining transactions do not fall to be assessed because the necessary evidence can’t be obtained.
The two year rule
Where your proposed assessment is for a VAT accounting period that is less than two years old (i.e. there must not be more than two years between the final day of that VAT accounting period and the date on which you make and notify your assessment) - see VAT Act 1994, section 73(6)(a) and VAEC1141 - the two year rule will apply and you may assess. If this is the case you need not concern yourself with any other time limits (i.e. the one year ‘evidence of facts’ rule).
The four year rule
For periods that are between two and four years old (i.e. by reference to the length of time between the last day of the VAT period and the date of your assessment) you may assess provided you can satisfy the one year ‘evidence of facts’ rule. See guidance at VAEC1143.
The twenty year
As explained above assessments under the twenty year rule are still subject to the one year ‘evidence of facts’ rule so officers must still make their assessments within one year of HMRC obtaining sufficient evidence to do so.
You should read VAEC1300 and VAEC1142, which looks at the one year ‘evidence of facts’ rule in detail.