VAEC1160 - Powers of assessment: VAT assessment powers: Time limits for long first period return assessments

Time limits for assessments involving long first period returns

The main reason for issuing a long first period return is for the convenience of both the trader and HMRC.

It saves the trader the difficulty of retrospectively establishing net quarterly liabilities. It involves only one document rather than many. For us it means issuing and processing a single return for one prescribed accounting period.

In the majority of cases involving a long first period there will normally be a liability to a Section 67 belated notification penalty, see VCP10370, or a penalty under Schedule 41 FA08 for failure to notify, see CH70000.

When making an assessment in respect of a long first period the provisions of Section 73 and Section 77 VATA 94 will normally allow us to assess for the whole of the prescribed accounting period.

Any Section 73 assessment should be raised in recognition of the following time limits;

• The two year rule, i.e. if the assessment is being made within 2 years of the end of the prescribed accounting period
• The four year rule, i.e. if the assessment is being made more than 2 years after, but within 4 years, of the end of the prescribed accounting period. Any assessment under the four year rule must also be made within the one year evidence of fact rule.
• The twenty year rule, i.e. if the assessment is being made more than 4 years after the end of the prescribed accounting period. This will normally be appropriate liable no longer liable cases. Any assessment under the twenty year rule must also be made within the one year evidence of fact rule.