VAEC3740 - Standard Notice 655 not appropriate: Alternative assessments
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.
Occasionally there is uncertainty about how the law or the facts of a particular case should be interpreted and different interpretations would lead to assessments for different reasons, for different amounts, in different periods and possibly even against different taxable persons.
If our preferred interpretation leads to an assessment that is subsequently appealed and deemed invalid, it is often too late to make an assessment based on an alternative interpretation within statutory time limits.
In such circumstances, it may be possible to raise alternative assessments where one assessment is made on a preferred basis, with payment required, and one or more other assessments made in the alternative but with payment not required unless and until an assessment becomes the preferred assessment.
All assessments are notified when made and the trader has a right of appeal in respect of any or all of them.
Alternative assessments are unusual, so if you have any doubts you should not make them without first discussing their merits with the Tax Administration Advice team, see VAEC0150.
When processing and notifying alternative assessments you should initially make and notify both the preferred and the alternative assessments by letter. Please see specimen letter VAT(LC)45: Notice of Preferred and Alternative Assessments, which is available on SEES.
The Notice of Assessment should be signed by the officer, the checking officer and if necessary the countersigning officer and a copy of the signed original should be sent to the trader together with covering letter VAT(LC)44: Alternative Assessment Letter, which is available on SEES.
Whereas the preferred assessment should be put on the trader’s ledger, the alternative assessment should not. In order to get the preferred assessment onto the ledger, a VAT641 should be completed and processed in the normal manner.
The VAT655 computer output document is then produced in the normal way and should be sent automatically to the trader.
This will inform the trader of any interest or penalty that may be due. It is important to inform the trader that this output document to a large extent repeats the notification that has already been made when a copy of the typed preferred assessment was sent, and is not an extra assessment except in respect of any interest or penalties.
It is important that the reasons for the assessments are made clear to the trader. This is often best done by way of a cross reference from the covering letter to the decision letter on which the assessments are based.
If it turns out that the preferred assessment is wrong, but the alternative assessment is correct, you should make any appropriate accounting adjustments where necessary.
For example, if the alternative assessment is for a lesser amount you should complete a VAT643. This will ensure that the trader’s main accounting record is updated.