© Copyright Acquisition International 2025 - All Rights Reserved.

Article Image - Understanding VAT Assessments: Key Advice for Businesses
Posted 8th October 2024

Understanding VAT Assessments: Key Advice for Businesses

Declaring and paying VAT is one of the many routine legal responsibilities resting on the shoulders of businesses.

Mouse Scroll AnimationScroll to keep reading

Let us help promote your business to a wider following.

Understanding VAT Assessments: Key Advice for Businesses
Percent sign on wooden block, calculator, coins stack.

Naz Maqsoom, Associate at Kangs Solicitors

Declaring and paying VAT is one of the many routine legal responsibilities resting on the shoulders of businesses. In an ideal world, this takes place without incident and has minimal impact on the day-to-day operations of the company.

However, in some instances, HMRC may decide to carry out a formal evaluation and/or investigation, if the department believes there is a discrepancy between the VAT a business has declared and what HMRC believes is due. It is crucial for all businesses to understand exactly what this process entails, including time limits on VAT assessments, and what you should do as an organisation to ensure a positive outcome.

Background on VAT assessments

If HMRC believes a company has underpaid on VAT, it will issue a VAT assessment to determine the amount due. This follows procedures set out in the Value Added Tax Act 1994 (Section 73, Failure to make returns etc). If the amount deduced from the assessment is disputed by the company being examined, an appeal must be lodged within 30 days, otherwise HMRC will proceed with measures to recover the debt. This is a key part of the process that businesses must be aware of: if you disagree with the outcome of the assessment, act quickly to challenge it.

HMRC is obliged to raise an assessment within the prescribed statutory period, to ensure that it does not issue a demand for under-declared or over-claimed tax once this period has elapsed. This requirement was emphasised in the recent case of Monmore Properties Ltd [2024] TC 09072. In this case, the First-tier Tax Tribunal upheld an appeal against five VAT assessments which were time-barred when raised by HMRC. The judge stated:

“Tax is undoubtedly due and would have been payable had an assessment been raised timeously. The simple fact is that it was not.”

This judgment is of significant relevance to anyone who has received a VAT assessment from HRMC but believes it was raised out of time. When receiving such an assessment, it is essential to ensure that it relates to the relevant VAT period, and is for the correct amount.

Time limits for VAT assessments: digging deeper

Section 77 of the Value Added Tax Act 1994 states that an assessment of an amount of VAT due must be made within the limits provided, and must not be made after the later of:

  • Two years following the prescribed accounting period
  • Or one year after evidence of facts, sufficient in the opinion of HMRC Commissioners to justify making the assessment, comes to the knowledge of the Commissioners

However, it must also be noted that if further evidence comes to the knowledge of the Commissioners after an assessment is made, a further assessment can be ordered. Knowing the ins and outs of the process, and being prepared for every possible step, is vital for businesses.

Notification of VAT assessments

While the Value Added Tax Act 1994 prescribes time limits for the making of a VAT assessment, it does not prescribe time limits for the notification of such an assessment. The basic rule is that HMRC has a maximum of four years from the end of the VAT period in question to issue a valid assessment, with this period extended to 20 years in the case of fraud.

Once HMRC has completed its inspection and has the information to calculate an assessment, it must prepare and issue it within 12 months. Any Penalty Notice must also be served within two years of deciding how much tax is owed. These rules have been firmed up and reinforced within HMRC following the Monmore Properties Ltd case mentioned above.

There is no specific manner in which a VAT assessment has to be made and notified. However, case law has determined that a letter which clearly contains the decision to assess, and provides details of the amounts outstanding for each VAT period, will suffice.

How to deal with a VAT assessment

If your business receives a VAT assessment from HMRC, it is imperative that all details are carefully checked to ensure that, amongst other things, the relevant VAT period calculations are correct and the assessment follows the rules around time limits.

In any event, seeking independent legal advice upon receipt of an assessment is a good approach, as this enables you to deal with any potential disputes in the most effective way possible. Be aware, be prepared, and you have the best possible chance of a satisfactory outcome in any investigation.

Categories: Finance, News


You Might Also Like
Read Full PostRead - Eye Icon
Autumn Statement 2016 – UKCloud Welcomes Digital Infrastructure Investment
Strategy
23/11/2016Autumn Statement 2016 – UKCloud Welcomes Digital Infrastructure Investment

Today, the Chancellor Philip Hammond has outlined his priorities for taxes and spending in the wake of the UK's vote to leave in the EU in his Autumn Statement. Notably for the technology sector, more than £1bn will be allocated to supporting digital infrastr

Read Full PostRead - Eye Icon
A World Leader in Consumer Transaction Technologies
Finance
11/09/2017A World Leader in Consumer Transaction Technologies

A World Leader in Consumer Transaction Technologies

Read Full PostRead - Eye Icon
Effective Strategies for Real Estate Investment
News
19/09/2022Effective Strategies for Real Estate Investment

What are your long-term financial goals? Do you want to have enough retirement savings to stop working sooner than most? Are you hoping to make more money now so that your family will be more comfortable in the years to come? Whatever your motivation is for br

Read Full PostRead - Eye Icon
Wave Goodbye to the  Zimbabwean Dollar
Finance
13/07/2015Wave Goodbye to the Zimbabwean Dollar

The Zimbabwe government has announced it will officially discard the Zimbabwean dollar. Hyper-inflation had rendered it near worthless, making the US dollar the most widely used currency.

Read Full PostRead - Eye Icon
Italian Firm Finds International Success
Legal
22/03/2020Italian Firm Finds International Success

The intricacies of law can lead some companies to become specialists in their specific geographic areas, but it can also inspire businesses to look further afield for ways in which to operate and innovate. One of the firms that sees innovation as essential is

Read Full PostRead - Eye Icon
Institutional Investors Shy Away from Hacked Businesses
Finance
16/04/2015Institutional Investors Shy Away from Hacked Businesses

A cyber attack could cost a business its investor backing, according to new figures revealed today. A survey of Global institutional investors by KPMG found that 79 percent of investors would be discouraged from investing in a business that has been hacked.

Read Full PostRead - Eye Icon
CMA Clears BT/EE Merger
M&A
15/01/2016CMA Clears BT/EE Merger

The Competition and Markets Authority (CMA) has cleared BT’s anticipated acquisition of EE. This follows its provisional decision to clear the merger in October 2015.

Read Full PostRead - Eye Icon
Gleiss Lutz Advises Apax Partners During Acquisition of Azelis
Legal
19/05/2015Gleiss Lutz Advises Apax Partners During Acquisition of Azelis

Gleiss Lutz Advises Apax Partners During Acquisition of Azelis

Read Full PostRead - Eye Icon
How to Land a Great Role as an Intern in Your Dream Career Field
News
27/04/2023How to Land a Great Role as an Intern in Your Dream Career Field

Whether you’re in the finance or business industry, getting an internship can help you impress your future employers. With that said, landing a great intern role can be a challenge if you don’t know what you’re doing.



Our Trusted Brands

Acquisition International is a flagship brand of AI Global Media. AI Global Media is a B2B enterprise and are committed to creating engaging content allowing businesses to market their services to a larger global audience. We have 14 unique brands, each of which serves a specific industry or region. Each brand covers the latest news in its sector and publishes a digital magazine and newsletter which is read by a global audience.

Arrow