The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note provides an overview of the principles that need to be applied by HMRC when they issue assessments to VAT registered businesses. HMRC are expected to use their 'best judgement' when making a decision to raise an assessment. Please see the Assessments guidance note for more information on assessments.
The principles regarding what constitutes best judgement are taken from a High Court decision in Van Boeckel where the following benchmark was established.
is not required to do the work of the taxpayer
must perform its duties honestly and above board
must fairly consider all material put before it and based on that material make a decision that is reasonable and not arbitrary
must be in possession of some material upon which it can base their judgement
These initial principles have been further clarified in subsequent decisions and in the case CA McCourtie the tribunal laid down three further considerations:
the facts must be objectively gathered and intelligently interpreted by HMRC
any calculations undertaken must be arithmetically sound
any sampling techniques must be representative
HMRC is expected to consider the following when issuing an assessment:
HMRC must be in possession of documents / material that has been used as the basis of the assessment and it is not acceptable for the amount to be based on gut instinct or 'plucked out of thin air'
the assessment must be reasonable and not arbitrary, and must be raised on a fair and reasonable basis
HMRC must consider all material facts when reaching its decision and no information or material that is relevant should be disregarded
calculations must be accurate and HMRC must use reasonable care when preparing calculations in order to ensure that they are accurate and fair
weighting should be used wherever possible in mark up exercises
if an assessment is based on one trading period, HMRC is required to ensure that the period selected is representative
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