INS12359 - Effects of insolvency on particular situations: Prime assessments, Officer's assessments and voluntary disclosures
Introduction
Requirements of an assessment
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)
Prime assessments
Action to be taken by NIU upon receipt of an Officers assessment/Voluntary disclosure
Assessments raised prior to VAT 769 input
Introduction
When, following a visit by an officer or as a result of other credibility checks, a trader is found to have understated or overstated the liability on their VAT returns, this can be addressed by an officer’s assessment input on a VAT 641. Similarly, if an error is notified by a trader, a voluntary disclosure can normally be processed using a VAT 642. General guidance on time limits and legislation applying to assessments can be found in AEC Assessments and Error correction.
Assessments may be divided into two broad categories:
- Prime Assessments - These are assessments raised where a return has not been received.
- Officer Assessments - These are assessments raised when it is discovered that the correct liability for a period is greater than an accepted return or prime assessment.
In either case the Commissioners power to assess is contained in section 73 VATA 1994. Once an assessment has been notified it is a debt due to the Crown and may be pursued through the courts or claimed in an insolvency.
In relation to assessments affecting insolvent traders, the following factors need to be considered.
Requirements of an assessment
When calculating or issuing an assessment, officers must use best judgement and ensure the assessment is made within specified time limits.
The time limits for making and notifying an assessment are fully explained in the guidance, AEC Section 1100. Generally, there are two time limits to consider before making an assessment. Each of the time limits determines a date by which the assessment must be “made”.
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)
Prime assessments
When the VAT 769 is input the computer will automatically assess any open periods.
If there is evidence in the Statement of Affairs that the departmental claim should be more than expected, it may be necessary to increase prime assessment(s) by use of a VAT 146.
The VAT 146 adjusts the computer account where:
- there is a prime assessment already on file; or
- there is no liability on file (this does not include a nil return).
The VAT 146 will not work where there is a return on file and in these circumstances the account must be amended in accordance with instructions relating to Officers assessments.
When the VAT 146 is input an amended claim is automatically generated.
Returns received for a lesser value than prime and officer assessments
If a return is received showing a net liability less than the sum of a prime assessment and an Officer Assessment for that period it will mismatch.
When this situation arises the caseworker should notify the Insolvency Practitioner appointed in writing, of the position. This is to advise them as to why we have not issued an amended claim and allow the opportunity to consider whether they wish to challenge the issue.
Action to be taken by NIU upon receipt of an Officers assessment/Voluntary disclosure
(a) Insolvency codes 1, 2, 3, 4, 6, 8 and 9
Pre-relevant periods: to enable the Officers Assessment to be processed & any interest due to be correctly calculated on the VAT mainframe, the following procedures have been agreed:
- upon advise that Officers Assessment has been raised, NIU will contact Officer to advise them when Insolvency signal is to be lifted
- Officer must arrange for V641 to be keyed onto VALID the day the insolvency signal has been lifted.
Because the insolvency signal has been lifted failure to process the V641 timely will result in post insolvency VAT returns being issued to the taxpayers original PPOB instead of to the Insolvency Practitioner.
- NIU will monitor for the V641 to show as ‘accept’ and then re-set the Insolvency signal the following day.
Voluntary Disclosures
Processing rules for Voluntary Disclosures are the same as those for Officers Assessments.
A Voluntary Disclosure may be received from an Insolvency Practitioner in circumstances were he has established that an error has been made on a VAT return that has already been rendered. This Voluntary Disclosure could be in the form of a letter for a period where a VAT return has already been submitted. It should not be in the form of a replacement return as this is not an acceptable method of notifying a Voluntary Disclosure.
Post-relevant periods: a VAT 641/642 can be input in the normal way through VALID for post relevant assessments, without the need for NIU to lift the VAT769. Once the assessment has been issued to the office holder, a copy should be sent to NIU to monitor payment.
(b) Insolvency codes 5 and 7
Traders who are in VA or administration usually remain on the insolvency suite for a very short space of time. Processing arrangements for the assessments will depend on whether a VAT 769 has been input and whether the case is still on the insolvency suite.
Notification of a voluntary disclosure.
A standard letter (Word 27.5KB) should be sent to the Insolvency Practitioner advising that the Voluntary Disclosure has been processed and that an amended claim will be issued.
Assessments raised prior to VAT 769 input
Assessments should be separated into pre and post relevant periods and processed separately. When possible, assessments for pre-relevant periods should be issued prior to the VAT 769 so that the claim issued to the office holder is correct. The assessment can be input to VALID in the normal way.
Assessments for post relevant periods can also be input but any penalties and interest calculated on the post-relevant periods will be deleted once a VAT 769 is input. Post-relevant assessments should be held and processed after the VAT 769 has been input and the case has been removed from the insolvency suite.
