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Aria Technology v HMRC

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Our pick of this week's cases

In Aria Technology v HMRC  [2020] EWCA Civ 182 (19 February), the Court of Appeal found that two letters sent by HMRC to the taxpayer that detailed the denial of input tax and the amount of VAT due to HMRC did amount to an assessment under VATA 1994 s 73.

While the earlier decisions in this case related to a much broader range of issues on a VAT missing trader intra-community fraud, the appeal to the Court of Appeal was limited to a single question on the meaning of an assessment for VAT purposes. 

The appellant argued that the two letters were not an assessment but were, rather, a correction of figures in the VAT return and therefore did not meet the statutory requirements for an assessment under s 73. 

The Court of Appeal considered the relevant case law and drew out four principles: 

  • there is no statutory definition of an assessment, but it is an act of HMRC constituting their determination of the amount of VAT due; 
  • there is no formality required for an assessment under any statute or regulation; 
  • no single form needs to be used: it can be contained in a letter or more than one letter; and 
  • the question of whether an assessment has been made is a purely objective one: the decision maker’s state of mind is not pertinent.

The objective test set by the Court of Appeal was: 

‘How would the document or documents said to record an assessment be understood by the reasonable reader?’.

The court found that, objectively, the two letters sent, when read together, would be understood as recording and notifying a determination of the amount of VAT assessed as being due to HMRC at the time of the letter. 

Further the court found that although there were three stages in s 73 – the decision to assess, the assessment, and the notification of the assessment – there may (as in this case) be no distinction between the stages. The decision to assess is implicit in the assessment and the notification of it. 

Read the decision.

Why it matters: HMRC does have a standard form letter on which it usually sends out notices of assessment. It did not use this form in this case. In obiter comments at the end of his judgment, Lord Justice Singh suggests that this was because HMRC, incorrectly in his view, concluded that a formal notice of assessment could not be given due to their internal processes on returns. Advisers who are used to seeing the standard form notice of assessment should keep in mind that an assessment giving rise to payment obligations may come in another form.

Also reported this week:

Issue: 1477
Categories: Cases