TC09555 - [2025] UKFTT 00748 (TC)

The section 73(1) test gives rise to two distinct questions: (1) whether the assessment has been made under the power conferred by that section and (2) whether the amount of the assessment is the correct amount for which the taxpayer is accountable.

The first question requires consideration of whether the assessment has been made in exercise of HMRC’s best judgment i.e. that HMRC have exercised their powers bona fides to reach a value judgment on the material before them. In essence they are to fairly consider all material placed before them and, on that material reach a decision which is reasonable and not arbitrary as to the amount of the tax due.

Errors identified in the assessment which represents an honest and genuine attempt to make a reasoned assessment of the VAT payable do not vitiate the assessment as made contrary to best judgment.

There are dangers in a rigid adherence to the two stages referred to at paragraph (1) above as the important issue for the Tribunal is to determine the amount of the assessment. An assessment which is raised contrary to best judgment is likely to be rare.

Even where an assessment is made contrary to best judgment it is open to the Tribunal to reduce the assessment to the correct figure on the evidence before it.

Thus the primary role of the Tribunal is to find the correct amount of VAT on the basis of the evidence before it, bearing in mind the taxpayer’s burden of proof. An assessment should be set aside only where it is so defective that justice requires it to be so set aside and/or justice cannot be done by reducing the assessment to the amount the Tribunal finds to be a fair figure.