Aria Technology Ltd v Revenue And Customs

An assessment under the Value Added Tax Act 1994 is a legal act determining the amount of VAT due. No prescribed form or particular heading is required. The decisive question is exclusively objective: how would a reasonable reader understand the document or documents said to record the assessment? The officer’s subjective intention or belief cannot override that objective meaning. A decision to assess, the assessment itself and notification may be distinguished conceptually, but the stages may merge in substance. Documents read together may therefore record and notify an assessment where they communicate that VAT is due, even if they are not headed Notice of Assessment.

HMRC denied the appellant input tax of £758,770.69 relating to transactions connected with alleged MTIC fraud and sent letters dated 6 and 7 October 2008. The letters denied the input tax, amended the VAT return and stated that £313,613.71 was due to HMRC. The First-tier Tribunal dismissed the appellant’s appeal, including its argument that the correspondence was not an assessment. The Upper Tribunal dismissed the appeal on that issue: [2018] UKUT 0363 (TCC). The Court of Appeal considered whether, objectively construed, the two letters recorded and notified an assessment under section 73 of the VAT Act.

1. Appeal dismissed. Singh LJ gave the judgment of the court. Leggatt LJ and McCombe LJ agreed.
2. Section 73 of the Value Added Tax Act 1994 contains no statutory definition of assessment. An assessment is generally a legal act by which the Commissioners determine the amount of VAT due. The legislation prescribes no particular formality. An assessment or its notification may be contained in a letter or in more than one document. A heading such as Notice of Assessment has no decisive significance.
3. For analytical purposes, a decision to assess, the assessment itself and notification of the assessment may be distinguished. Depending on the circumstances, however, there may be no substantive distinction between those stages. The decision will usually be implicit in the making of an assessment, and the assessment will be implicit in notification. The power under section 73(1) is discretionary rather than mandatory, and a lawful decision not to assess could arise in another case, but that issue was immaterial here.
4. The test is exclusively objective. The question is how the relevant document or documents would be understood by a reasonable reader. The officer’s subjective intention, belief or state of mind cannot operate as a subjective override. The Court of Appeal’s reasoning in Courts plc v Customs and Excise Comrs [2004] EWCA Civ 1527 was applied. The discussion in Don Pasquale, House and Bassimeh was understood as recognising a conceptual distinction between assessment and notification, not as requiring an inquiry into subjective intention.
5. The letters of 6 and 7 October 2008 had to be read together. They objectively recorded and notified a determination that £313,613.71 of VAT was due immediately. They therefore constituted an assessment, rather than merely a correction of the figures in the VAT return. The absence of a formal Notice of Assessment did not alter that conclusion.

1. Court of Appeal (Civil Division) dismissed the appeal against the Upper Tribunal’s decision.
2. Upper Tribunal (Tax and Chancery Chamber) dismissed the appeal from the First-tier Tribunal: [2018] UKUT 0363 (TCC).
3. First-tier Tribunal (Tax Chamber) dismissed the appellant’s appeal on 16 February 2016.