© 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
Business Automation Solutions
Innovation
05/10/2022Business Automation Solutions

Square 9 Softworks, the ‘Most Innovative Digital Transformation Software Provider’ for 2022, has developed a stellar international reputation for simplifying common business tasks with a complete overhaul of its clients’ business processes.

Read Full PostRead - Eye Icon
Malta: An Excelling European Economy
Finance
31/07/2016Malta: An Excelling European Economy

Based in Malta, Francis Zammit Dimech Associates are a highly renowned law firm, whose aim is to provide a one stop shop for legal services.

Read Full PostRead - Eye Icon
Can You Pay to Have Your Credit Fixed?
Finance
06/12/2021Can You Pay to Have Your Credit Fixed?

Many companies claim they can "repair" or "fix" your credit. And yes, some of these types of services are scams. Moreover, you can do it yourself for free if you’re willing to put in the time and effort.

Read Full PostRead - Eye Icon
10 Steps to Take to Start Your Own Trucking Business
News
23/05/202310 Steps to Take to Start Your Own Trucking Business

Starting your own trucking company offers a unique opportunity to carve out a niche in the ever-expanding transportation and logistics industry. As an owner, you can enjoy the freedom of being your own boss while reaping the benefits of meeting rising demands

Read Full PostRead - Eye Icon
7 Important Tips for Streamlining Your Workflows
News
20/09/20227 Important Tips for Streamlining Your Workflows

If you're like most people, your days are filled with a never-ending to-do list. From the moment you wake up until you go to bed, there's always something that needs to be done. And if you don't have a system for managing your tasks, it can be easy to get over

Read Full PostRead - Eye Icon
Building a Better Future
Innovation
30/04/2020Building a Better Future

There are few things in the world that can unite people quite like the universal burden of cancer and neurodegenerative diseases. A company located on the German border near the Czech Republic remains wholly dedicated to the ongoing fight to erase these diseas

Read Full PostRead - Eye Icon
How to Set and Achieve Your Business Goals
Leadership
27/04/2020How to Set and Achieve Your Business Goals

The ability to set and reach goals within your career is an important part of success in business. As a business leader, you need to be able to help others create and achieve their goals as well as your own. However, even the most ambitious and capable people

Read Full PostRead - Eye Icon
Aligning Interests
Finance
07/05/2019Aligning Interests

AppleTree Capital LLP is an awarded independent financial advisor, specializing in Emerging Markets and Absolute Return strategies. Recently, we profiled the firm and spoke to Managing Directors, Michael Nicoletos and Dimitris Apistoulas who provided us with a

Read Full PostRead - Eye Icon
Valuable Tips for Bootstrapping an API-Based Startup
Innovation
19/04/2022Valuable Tips for Bootstrapping an API-Based Startup

An API-based startup is one of the best business concepts to build up using the bootstrapping method.



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