When can HMRC assess additional VAT due to an increase in consideration for a UK supply?

Under paragraph 23 of Schedule 9ZD, HMRC may assess additional VAT to the best of their judgement where a supplier fails to amend their VAT return or notify HMRC of an increase in consideration for a UK supply. The assessment relates to the VAT period in which the original supply was accounted for.

What are the time limits for HMRC assessments relating to increased consideration under Schedule 9ZD?

HMRC must assess within the general time limits in section 77 and no later than two years after the end of the relevant VAT period. If HMRC obtain sufficient evidence later, they have one year from the date that evidence comes to their knowledge to make the assessment.

Can HMRC make a further assessment if additional evidence is discovered after the initial assessment?

Yes. If HMRC discover further evidence after an initial assessment, they may make an additional assessment for any further VAT due. This further assessment is subject to the same overall statutory time limits in section 77 and operates on the same best-of-judgement basis as the original assessment.

How do existing penalty and interest rules apply to these assessments for increased consideration?

Section 76, which governs assessments for penalties, interest, and surcharges, is extended to cover assessments made under these provisions. Similarly, section 73(9) rules on crediting amounts already paid against an assessment apply equally, ensuring consistent treatment alongside other Schedule 9ZD modifications.

Value Added Tax Act 1994 section 23

Assessments in connection with increase in consideration: modifications

Section 23 of Schedule 9ZD sets out how HMRC's assessment powers are modified to deal with situations where the consideration for a UK supply increases and the supplier fails to make the required amendment or notification.

Where a supplier fails to amend their VAT return or notify HMRC of an increase in consideration for a UK supply, HMRC may assess the additional VAT due to the best of their judgement.
The assessment relates to the VAT period in which the original supply was accounted for, and must be made within the overall time limits in section 77, and no later than 2 years after the end of that period or, if later, one year after HMRC obtain sufficient evidence to justify making the assessment.
If further evidence comes to light after an initial assessment has been made, HMRC may make an additional assessment on the same basis, subject to the overall time limits.
The existing rules on assessments for penalties, interest, and surcharges under section 76 are extended so that they also apply to assessments made in connection with increased consideration under these provisions.

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