DMBM530530 - Debt and return pursuit: VAT: recovery timetable/indicators: assessments and surcharge
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Prime (Central) tax assessments
A prime (central) tax assessment is issued if a payment customer fails to render a return on time. In most cases this assessment is calculated and issued automatically by the computer in the VAT Central Unit. In a small percentage of cases the computer either cannot calculate an assessment (e.g. belated notifications) or is unable to issue an assessment (e.g. automatic assessments are unrealistic and are therefore manually suppressed).
When a prime assessment cannot be issued for a continuing customer, details of the assessment will be sent to the local office for manual issue (see DMBM530730). The time limits for prime assessments, as for any assessment made under section 73(1) VAT Act 1994, are contained in sections 73(6), 77(1) and 77(4); see .
Time Limits for Assessments
The two year rule
The two year rule allows you to make an assessment for a prescribed accounting period, at any time, providing the last day of the period which contains the misdeclaration, or for which no return was rendered, is no older than two years old on the day you make and notify your assessment.
Assessments for periods which are over two years old are governed by the 바카라 사이트˜one year바카라 사이트™ rule and the 바카라 사이트˜three year바카라 사이트™ capping rule, under which we can assess beyond two years within certain restrictions. See .
The one year rule
The one year rule allows an assessment to be made up to 바카라 사이트˜one year after evidence of facts sufficient in the opinion of the commissioners to justify the making of the assessment, comes to their knowledge바카라 사이트™. See .
바카라 사이트˜Sufficient바카라 사이트™ facts means having the necessary information to ensure the assessment is to 바카라 사이트˜best judgement바카라 사이트™. The 바카라 사이트˜one year바카라 사이트™ rule applies in conjunction with the 바카라 사이트˜four year바카라 사이트™ rule.
The four year rule
The four year rule means you will be in time to assess if the last day of the period which contains the misdeclaration, or for which no return was rendered, is no older than four years on the day you make and notify your assessment. The 바카라 사이트˜four year바카라 사이트™ rule therefore works in a similar way to the 바카라 사이트˜two year바카라 사이트™ rule. The difference is that to be able to assess back as far as four years, your assessment must be made and notified within one year of evidence of facts. See .
The guidance regarding time limits on raising VAT assessments can be found in the .
Default Surcharge
To improve customer compliance the Finance Act 1985 made provision for the introduction of default surcharge for failure to render and/or pay returns on time. The system was introduced on 1 October 1986, for payment customers.
Most customers are regarded as being in default if their return and/or full tax for the relevant tax period are not received when due (see DMBM530510).
In June 2001 the Chancellor of the Exchequer said that automatic VAT fines will be levied only after written communication is first sent offering advice and help to sort out problems. In view of the departments rescue culture, businesses with a turnover of less than £150,000 will receive a help letter (VAT 172) at first offering help and advice.