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Background facts
Background facts
On 15 July 2022, the Appellant’s agent filed an error correction notice with HMRC on behalf of the Appellant. This error correction notice was for the VAT periods 09/19, 11/19, 02/20, 03/20, 06/20 and 03/21. The agent explained the reasons for the error and outlined the steps put in place by the Appellant to avoid any such errors in future. Attached was an appendix setting out the corrected figures for each of the affected periods.
The Appellant’s error correction notice was acknowledged by HMRC on 15 July 2022. This was an automatically generated acknowledgment email. It seems that HMRC then lost or misfiled the error correction notice that they had received.
On 22 May 2023, the Appellant’s agent emailed HMRC to provide a further copy of the error correction notice. This followed a telephone call from the agent to HMRC, to enquire about progress, in which the agent was told HMRC had no record of the error correction submitted.
On 27 June 2023, HMRC Officer Maddison completed form V642. The calculation date was entered as 22 May 2023, the date on which the Appellant’s agent had supplied a further copy of the error correction. I am satisfied that HMRC accepted the Appellant’s calculations in full, and no further information or explanation was required from the Appellant.
Within form V642 is a table that shows the detail entered by Officer Maddison in respect of the assessment raised upon the Appellant. In the table there is one line for each relevant VAT period. A column shows the “attribution code” for each VAT period is “1”. A further column shows the amount “Due to HMRC” for each VAT period. The next column (the amount “Due from HMRC”) is blank. There is then a column headed “T”, where Officer Maddison has entered the code “2”. There are then three columns left blank, headed “BT”, “PPR” and “Sus”. The final two columns are headed “Pen” and Int”, and above both of these columns is the further heading “Inhibit”. The Penalty column has the code “1” for each period; the Interest column has the code “0” entered for each period.
HMRC’s published guidance VAEC8820 explains that code 1 in the “attribution code” column means that the Appellant made an input tax error. VAEC8820 explains that the amount due to HMRC should have code 0, 1 or 2, but does not explain what those figures signify. The code in Column “T” is explained as being the type of assessment that should be issued; Officer Madison has selected “2”, which (by reference to VAEC8820) I understand to be an assessment where there was an under-declaration of tax and where there is a liability to interest. “BT” is Behaviour Type, “PPR” is Penalty Percentage Rate” and “Sus” is Suspension Code.
Finally, VAEC8820 explains the following when inhibits are being set:
Penalty inhibit
…
For periods which are subject to Schedule 24, the field must be completed as follows:
0 – inhibit not set. This code should be inserted for all over-declarations and, subject to the following bullet, all under-declarations.
1 – inhibit set. The inhibit may be set temporarily, for example when a case is being referred under the evasion referral procedure but a tax assessment needs to be raised as the period is going out of time for assessment purposes. This is likely to occur very infrequently.
N.B. The authorising level for penalty inhibits should be at least one grade above that of the officer setting the inhibit.
Interest inhibit
An interest inhibit code must be inserted for each line, see VDIM7000 and VDIM8050 for full guidance on setting inhibits:
0 – inhibit not set. This code should be inserted for all under-declarations and over-claims where interest should be assessed. This code is also usually used for over-declarations but see below.
1 – inhibit set. This code should be used for over-declaration on which statutory interest has been paid, see VSIM7800 … This code should also be used for under-declarations and over claims where interest is not to be assessed.
VAEC8820 makes it possible to understand that, by the codes he entered on form V642, Officer Maddison had chosen to inhibit the issue of a penalty but he did not inhibit interest.
The notes for the form V642 on HMRC’s systems show the following:
How signatory verified - Authorised agent Periods applicable - 09/19, 11/19, 02/20, 03/20, 06/20, 03/21 Reason for error - Incorrectly claimed input tax If interest inhibited, why - N/A Box 6-9 adjustments required - Any other relevant information - N/A
I find, on the balance of probabilities, that this information in the notes section was entered by Officer Maddison.
The notes show that form V642 was passed to Officer Errington. As there is no witness statement from Officer Maddison (and, obviously, no oral evidence), I do not know the date on which form V642 was passed to Officer Errington, and I am not told Officer Maddison’s reasons for passing form V642 to another officer. Having regard to VAEC8820, I find, on the balance of probabilities, that Officer Maddison passed the V642 to another officer because he was following the guidance in VAEC8820 that an officer of a higher grade was required to authorise the penalty inhibit.
On 18 July 2023, Officer Errington counter-signed the V642. A couple of hours later, still on 18 July 2023, Officer Maddison created what is described as a “Tax Return form bundle”.
The next morning, on 19 July 2023, HMRC’s notes record that “ETMP authorised” by Officer Errington. In the absence of witness evidence to better explain HMRC’s internal notes, I find on the balance of probabilities that ETMP stands for Enterprise Tax Management Platform. As explained by Sir Jim Harra in an HMRC corporate report published on 13 February 2025:
The Enterprise Tax Management Platform (ETMP) is the strategic technology backbone of HM Revenue and Customs’ (HMRC’s) tax accounting and payment capability. It currently administers over 40 tax regimes, with all remaining tax regimes expected to migrate onto the platform in due course. ETMP provides returns processing, tax accounting, payments functionality and data mastery in one system and is accessed by approximately 40,000 users across HMRC daily. It handles over £800 billion of tax revenue and payments annually.
In the absence of any other explanation provided by HMRC I find, on the balance of probabilities, that ETMP is the digital platform through which HMRC issue VAT assessments.
On the basis of the notes for the form V642, I find that on 19 July 2023, Officer Errington authorised the raising of an assessment on the Appellant. Such assessment included interest (from the adjusted date selected by Officer Maddison) but there was no penalty assessment.
On 22 July 2023, HMRC notified the assessment to the Appellant. This included a VAT Statement of Account, dated 22 July 2023, which stated:
We have made assessments of tax, surcharge, penalty and interest, where appropriate and adjusted for any over-declarations of tax.
As a result, your VAT account at 22 July 2023 shows the following:
Tax £54,468.00
Interest £5,044.83
The total balance now is £59,512.83
Please pay any amount due immediately.
The accompanying VAT notice of error correction had a stated “date of issue” of 22 July 2023. The text of the notice provided:
Thank you for telling us about your tax liability.
We have made assessments for tax and interest, where appropriate, and/or approved VAT credits for over-declarations for the period or periods shown on page 2 onwards.
…
Summary
Date of calculation: 21 May 2023
I find that the date of calculation was not (and could not have been) 21 May 2023, as stated. That is because, on 21 May 2023, HMRC were still unaware of the error correction that had been submitted on 15 July 2022. I find that the date of the calculation was either 22 May 2023 (the date on which the agent provided a further copy of the error correction notice) or 27 May 2023 (the date on which Officer Maddison began completion of the V642).
On 16 August 2023, the Appellant’s agent sought a review of the assessment raised, on the basis that the assessment dated 22 July 2023 was made out of time. The agent also challenged the imposition of interest.
On 28 September 2023, HMRC issued their review decision that the assessment should be varied to remove the interest (subject to its potential re-imposition when calculated from a different start date). In this review decision HMRC considered that the assessment was raised on 27 June 2023 (the date on which Officer Maddison had entered data into form V642).
On 13 October 2023, the Appellant’s agent emailed HMRC. In this email, the agent referred to HMRC’s guidance at VAEC1120. That guidance provides:
The VAT Act 1994 prescribes time limits only for the making of an assessment. It does not prescribe time limits for the notification of an assessment.
It is policy that notification should be done quickly, but delays in notification can occur due to localised and administrative difficulties.
Problems arise when an assessment is made close to the time limit for assessing. An officer may make an assessment in time but it may not be notified until later. HMRC have faced a number of challenges in this area in the past.
Therefore, HMRC as a matter of published policy, rely on the date of notification of an assessment as the material date for time limit purposes.
It is therefore essential that assessments are notified within the statutory time limits prescribed in the VAT Act for the making of assessments.
The agent noted that the assessment had been notified after one year, and asked for an explanation of why HMRC appeared to have departed in the Appellant’s case from their published policy of treating the date of notification as the date of assessment. The agent also referred to VAEC6080 which provides:
HMRC’s view of the law is that the making of the assessment for the amount of tax due and its notification to the taxpayer, by either a manual assessment notification or a computer produced form VAT655, are separate and distinct operations
This is based on the wording of Section 73(1) (2) and (9) VAT Act 1994.
The VAT legislation prescribes time limits only for the making of an assessment. It does not prescribe any time limits for the notification of an assessment.
In the past HMRC defended assessments where we could demonstrate that we had made an assessment, i.e. finished quantifying the amount and had taken the decision to assess, before the time limit for the making of the assessment had expired, although it may have been notified at a later date.
However, it is clearly undesirable that our time limit rules should attach to a made date which is neither obvious or routinely disclosed to taxpayers.
Consequently, all assessments must have be notified to the taxpayer within the time limit for making the assessment in order to demonstrate that it was indeed made in time.
Any detrimental revenue affect of using the notification date for time limit purposes is relatively insignificant and more than compensated for by the removal of contentious litigation surrounding the made date.
In cases where there is a danger that an assessment may go out of time whilst awaiting the VAT641 to be processed, it will be necessary to notify the assessment by letter, see specimen letter VAT(LC)16: General VAT assessment letter (live trader) available on SEES.
The agent asked for information and more detail, including the dates on which the assessing officer and counter-signing officer had completed, checked and dated the V642 form. The agent asked for a response prior to the deadline for the Appellant to appeal to the FTT. It seems that no response was received by this date.