Commentary

V7.323 The power to make 'best judgement' assessments

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.323 The power to make 'best judgement' assessments

Part V7 Tax planning | Commentary

V7.323 The power to make 'best judgement' assessments

The legislation

Before looking at some practical situations of best judgement, it may be useful to directly review the key legislation on this topic:

  1.  

    •     Failure to make returns:

  2.  
    1.  

      'Where a person has failed to make any returns required under this Act or to keep any documents … or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgement and to notify it to him'. [VATA 1994, s 73(1)].

  3.  

    •     Evidence of supplying goods:

  4.  
    1.  

      '… if he fails to prove that goods that he has acquired (either by supply, acquisition or importation) have been or are available to be supplied by him … they may assess to the best of their judgement and notify to him the amount of VAT that would have been chargeable in respect of the supply of the goods if they had been supplied by him'. [VATA 1994, s 73(7)].

In reality, there are two main situations when an officer will use his powers to assess tax under best judgement:

  1.  

    •     when records are incomplete or inadequate, or

  2.  

    •     when records are fully complete, but the officer has reason to doubt the credibility of the figures

See Examples 1 and 2.

Example 1

Bill has been trading for one year as a fish and chip shop and has never kept any record of his takings figures – he has also destroyed

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