VAEC2940 - Section 73(1) and 73(2) assessments: Distinction between the two

The procedural guidance in this manual only covers the VAT Mainframe and VISION processes. For guidance on the Making Tax Digital and ETMP processes for fully migrated customers, see VAEC0200 and the Making Tax Digital for VAT compliance toolkit.

Section 73(1)

HMRC’s power to assess tax is contained in Section 73 of the VAT Act 1994. The most frequently used assessing power is Section 73(1) which empowers HMRC to make assessments where

• traders have failed to send in returns, or
• returns are incomplete or incorrect, or
• a trader fails to keep documents and facilitate verification.

Section 73(2)

In contrast Section 73(2) empowers HMRC to make assessments in the following circumstances

• to recover a credit which was not properly due to the trader, most commonly used when we are assessing an incorrect repayment return, or
• where a payment for additional credit has been made to a trader following an error correction notification, see VAEC7000, and it subsequently transpires that the credit was not properly due to him.