18121

ASSESSMENT – Time Limit for making assessment – Time when assessment “made” – Meaning of “made” – Form VAT 641 containing 1g assessments – Signed by assessing and check officers within time limit- Our assessment only required countersignature – VAT 641 countersigned outside time limit – Whether the remaining assessments “made” within time limit – Appeal dismissed – VATA 1994, SS 73(1), (6), 77(1)

LONDON TRIBUNAL CENTRE

	TERENCE FREDERICK HICKS  & HELEN HICKS	Appellants	
T/A PARC GOLF CENTRE

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	ANGUS NICOL  (Chairman)
						ANGELA WEST 
					 	R D CORKE, FCA

Sitting in public in Cardiff on 12 February 2003

Frank Mitchell, Pricewaterhouse Coopers, Chartered Accountants, for the Appellants

Alison Foster, QC, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1.	The only issue in this appeal is whether an assessment to VAT in the sum of £3,065, in respect of the period which ended on 13 December 1994, was made within the time limit imposed by section 77 of the Value Added Tax Act 1994 (“the 1994 Act”).

The facts

2.	The facts in this appeal are not in dispute, and we find them to be as set out in the following paragraphs.  They are taken partly from the statement of case, and otherwise from the only evidence called, which related to the Commissioners’ internal procedures for making assessments.

3.	The Appellants carry on business in partnership at Parc Golf Centre near Newport, Gwent, and the business is that of a golf club.  In September 1997 officers visiting the Appellants’ premises noted that the Appellants had treated part of their income, that which was derived from membership, green fees, and range fees, as exempt.  Assessments to tax and to misdeclaration penalties were accordingly raised.  The Appellants contended that the Club was a non-profit-making body and was entitled to treat that income as exempt under Group 13 of Schedule 9 to the 1994 Act.  The Commissioners’ case was that the Club made no supplies, and that the Appellants were trading as partners for profit.  Eventually an agreement under section 85 of the 1994 Act was entered into, under which the misdeclaration penalties were mitigated by reducing them to nil, an amount of tax of £30,434, the subject of a voluntary disclosure of 6 September 1999, was maintained in full, and the assessment for the period 12/94 remained the subject of the dispute now before this Tribunal.

4.	The notice of assessment, which was dated 13 January 1998, contained eleven assessments, for each of the periods from 12/94 to 6/97.  The form VAT 641 an internal document, contained 19 lines.  Lines 1 and 2 related to the assessments now under appeal.  Line 19, which related to a misdeclaration penalty in respect of the period 6/97, had an inhibit indicated in the appropriate column.  None of the other lines had an inhibit.  The form was dated and signed by the assessing officer on 24 December 1997, and was signed by the check officer on the what appears to be the same date, though the date on the copy is indistinct: it can be seen that it was a day in December 1997.  There was a countersignature, dated 2 January 1998, the reason for which was given as “MP inhibits”, in other words, “misdeclaration penalty inhibits”. The box for the countersignature contains the hand-written words “line 19”, indicating that that is the line to which the inhibit refers, and “POG”, standing for “period of grace”.  The form itself was dated 24 December 1997.  

5.	The assessing officer, Caroline Phelan, said in her witness statement that she had first sent a letter of intent to the Appellants, together with a schedule of assessment, dated 8 December 1997, requesting a response from them by 17 December if they wished to bring any further information to the attention of the Commissioners or make any observations on the calculation.  No response was forthcoming, and she raised the assessment based upon the figures which she had notified to the Appellants.  She said that she had completed the form VAT 641 on 24 December 1997, indicating that one period, in line 19, required an inhibit and therefore a countersignature.  Mrs Phelan said that she had passed the file and the form VAT 641 to the check officer, Carolyn Hamilton, also on 24 December 1997.  Miss Hamilton said that she checked the form VAT 641 relating to the Appellants and signed it on 24 December 1997, and passed it to the surveyor, Mr Graham Wilcox, on 2 January 1998. She said that she thought that the Commissioners had to get the 641 out by Christmas or it would have been out of time.  She knew of no reason why it should not be processed, and added that without the countersignature she would not have thought that it would be processed.  The notice of assessment relating to line 19 could not have come into existence without a countersignature, nor could a notice of assessment which included line 19.  She said that she did not know if 9 January 1998 was the date on which the assessment was keyed in, and she would not have thought that it cold be keyed in until countersigned.

6.	Mr Wilcox gave a brief summary of the procedure for issuing an assessment.  The assessing officer would complete a form VAT 641 and sign it.  It would be checked, together with any supporting schedules, both arithmetically and in principle, by the check officer, who would then sign it.  The countersignature would only be required to validate the setting of an inhibit for misdeclaration penalty or interest, or if there were an overdeclaration.  After the VAT 641 had been checked and, if required, countersigned, it would be sent for batching for electronic input, which would result in the production of a form VAT 655, the notice of assessment, which would then be sent to the trader.  In the present case, Mr Wilcox said that he received the Appellants’ VAT folder, which in fact contained two VAT 641s, both of which required countersignature because each bore an inhibit in respect of a misdirection penalty.  He countersigned both forms on 2 January 1998.  The VAT 641 was checked at every stage up to keying in, Mr Wilcox said.  If there were no inhibits, the form would go straight from the check officer to keying.  The stages are chronological; logically they should be done sequentially, but there was no rule that they should.  The letters “POG” hand-written in the countersignature box stood for “Period of Grace”, in relation to the misdeclaration penalty.

7.	Mr Wilcox referred to a Customs and Excise publication which included in its Part 17C, dealing with VAT assessments, “Table 34 Completion of Form VAT 641 Officer’s Assessment”.  This contained instructions as to the completion of that document, in respect of which the introduction said, “Input of a VAT 641 automatically generates a VAT 655, Notice of Assessment, together with any other relevant documentation....”  Relating to inhibits, the publication said,

•	MP inhibit.  A misdeclaration penalty inhibit code must be completed for each line of assessment
•	0 - inhibit not set.  This code should be inserted for all overdeclarations and those underdeclarations which are liable to MP.
•	1 - inhibit set.  This code should be inserted to identify that line of the assessment as not liable to MP.  Setting the inhibit will exclude that line from the misdeclaration for that period being tested for MP.  The amount will still be included in the gross amount of tax.  Do not use 1 for overdeclaration lines.
•	The countersignatory level for MP inhibits should be at least one grade above that of the officer setting the inhibit....”
	
Dealing with the signing of the VAT 641, it continued,

•	Assessing officer’s signature.  To be signed by the officer raising the assessment.
•	Check officer.  To be completed by any officer checking the assessment
•	Countersignature.  To be completed by the countersignatory.... You should indicate on the ‘reason’ line why the form required a countersignature.”

Lastly, the third section of this Part deals with the processing of the VAT 641:

“Once you have completed the form and it has been checked and/or countersigned (as appropriate) the top copy should be forwarded to the VALID pre input control seat for batching and eventual keying.  The VAT 655 will be generated showing the OA reference number of the assessment.
	The information which is keyed from this document will be transferred to the mainframe computer and processed overnight to update the trader’s file.”

It also mentions that before the trader’s file is updated several checks are made.  The reader is advised as to what to do if these checks reveal an error and the document is rejected.  If the input passes the checks, two copies of the VAT 655 are produced by the computer.

8.	Reference was also made to Notice 915, entitled “Assessments and Time Limits: Statement of Practice” published in March 2002, and replacing the previous Notice 915.  At the end of this notice, this statement of practice states:

“To avoid any uncertainty, where for example an assessment is ‘made’ in time but you are not notified until after the time limit for assessing has expired, we will always apply time limit rules to the ‘notified’ date rather than the earlier ‘made’ date.

The ‘notified date’ for this purpose is the date on which we send the assessment by post, hand, fax or e-mail to your last known address.

This date will be shown on the letter or other formal notification of the assessment.  Any letter of notification will be clearly headed up ‘Notification of Assessment’ and will be signed and dated.

A pre-assessment letter issued for the purposes of setting out why we believe an assessment to be necessary and detailing the calculation of arrears, is not the notification of an assessment and will be clearly marked as such.”

The statutory provisions

9.	Section 73 of the Value Added Tax Act 1994 provides, so far as bears upon this appeal, as follows:

“(1)	Where a person has failed to made any returns required under this Act ... or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him.
. . .
(6)	An assessment under subsection (1), (2) or (3) above of an amount of VAT due for any prescribed accounting period must be made within the time limits provided for in section 77 and shall not be made after the later of the following—
	(a)	2 years after the end of the prescribed accounting period; or
. . .
(9)	Where an amount has been assessed and notified to any person under subsection (1) ... above it shall, subject to the provisions of this Act as to appeals, be deemed to be an amount of VAT due from him and may be recovered accordingly....”

The time limit is introduced in section 77, which, so far as is relevant, provides:

“(1)	... an assessment under section 73 ... shall not be made—
	(a)	more than 3 years after the end of the prescribed accounting period....”

The Appellants’ contentions

10.	The Appellants were represented by Mr Frank Mitchell of PricewaterhouseCoopers.  He submitted a skeleton argument.  He observed that the letter of intent, dated 8 December 1997 (though the day was indistinct), stated that at that date no assessment had been made.  The form VAT 641 was signed by Mrs Phelan and dated 24 December 1997, and by Miss Hamilton on a date which was illegible in the copy in the possession of the Appellants.  In the copy before us it was indistinct but in December 1997.  The form was stamped 24 December 1997.  The countersignature by Mr Wilcox was dated on an illegible date in January 1998.  Whenever it was in January, it was outside the time limit.  The VAT 655 was dated 13 January 1988, and the date of calculation was given as 9 January 1998.

11.	Mr Mitchell contended that it was established in law that an assessment was not “made” until it was notified to the taxpayer.  Alternatively, the assessment was not made until it was processed, which in this case was 13 January 1998.  In the further alternative, the assessment was not made until countersigned, which was on 2 January 1998.  In a further argument, Mr Mitchell submitted that the Commissioners, deciding to treat assessments which were notified to the taxpayer after the time limited as being out of time (see Notice 915), acted ultra vires; and that if Notice 915 was not ultra vires the Commissioners were bound to exercise their discretion in favour of a taxpayer in the interests of proper administration of the tax and equal treatment of taxpayers.  

12.	On the first point, Mr Mitchell said that the VAT 641 was an internal form, for the creation of an assessment.  The taxpayer would never see that form.  It was fed into the computer, and generated the VAT 655.  There was no inhibit in the VAT 641 in this case except in line 19.  If line 19 had not been there no countersignature would have been necessary, but since it was there the form, not the assessment, had to be countersigned.  Each item in the notice of assessment was a separate assessment:  see Customs and Excise Commissioners v Le Rififi [1995] STC 103.  The countersignature was required to validate the VAT 641, because without it the notice of assessment could not have been processed.

13.	By section 73(1) of the 1994 Act, in order to raise an assessment the Respondents must “assess the amount of VAT due from [the taxpayer] and notify it to him”.  Section 73(6) provides that an assessment under section 73(1) “must be made within the time limits provided for in section 77”.  The time limit in section 73(6) therefore referred back to the assessment being “made” under section 73(1).  But as the word “made” does not appear in section 73(1) the assessment cannot be deemed to have been “made” under that subsection until all of the criteria [sic] of that subsection have been fulfilled, which includes notifying it to the taxpayer.  If “assess” and “notify” were separate requirements of section 73(1) and the time limits only required the Commissioners to “assess” then subsection (6) would have said so.  In fact it requires that the assessment “must be made within the time limits provided for in section 77”.  It was contended that therefore the assessment is only “made” when all of the conditions of section 73(1) are fulfilled, namely, that the Commissioners have assessed the amount of tax due and notified it to the taxpayer.  It was not contended, Mr Mitchell said, that assessment and notification were the same thing, only that in order to “make” an assessment the Commissioners must assess and notify.

14.	Mr Mitchell relied first upon House (t/a P & J Autos) v Customs and Excise Commissioners [1994] STC 211, 222, where May J described as superficially astonishing the contention that an assessment was within time if made according to the internal procedures of the Commissioners within the relevant time limits even if it was not notified to the taxpayer until after the expiration of those time limits.    He relied also upon the Tribunal’s decision in Royal Bank of Scotland PLC v Customs and Excise Commissioners (1999) (Decision No 16418) as authority for the proposition that “the intention of the statute was other than that ‘assess and notify’ in section 73(2) of the VAT Act 1994 was to be considered a single act and not two acts separated in time,” although the Tribunal was not deciding that appeal on that ground.  Therefore, Mr Mitchell contended, the assessment must be made and notified for it to be a valid assessment.  He further contended that if the requirements for assessing and notifying were held to be separable, the assessment in question was not “made” prior to the date upon which it was countersigned by Mr Wilcox.

15.	It was accepted by Potts J in Customs and Excise Commissioners v The Post Office [1995] STC 749, Mr Mitchell said, that there was a distinction between the date on which an assessment was “made” and that on which it was “notified”. However, Potts J did not hold that the date of assessment was the date on which the VAT 641 was signed by the assessing officer.  Having cited that passage, the Tribunal in Royal Bank of Scotland concluded,

“However, in the light of the evidence before us that an assessment whether by way of administrative action or on the merits could be stopped or altered at any time prior to the notice going out and where the VAT form 641 specifically provides for a countersignature there is in this Tribunal’s view insufficient evidence to establish that an assessment was made prior to 5 January 1999.”

Mr Mitchell regarded that as particularly persuasive because it was the assessing officer’s evidence in Royal Bank of Scotland that the VAT 641 did not require countersignature and had not been countersigned.  Applying the Royal Bank of Scotland decision, Mr Mitchell contended, the assessment was made, in the present case, on 13 January 1998, the date upon which the VAT 655 was stamped.

16.	Referring to Staffquest v Customs and Excise Commissioners (2002) (Decision No 17632), Mr Mitchell pointed out that the Tribunal did not follow Royal Bank of Scotland, on the ground that the relevant passage was obiter.  But Mr Mitchell submitted that the decision in Staffquest was based upon a misinterpretation of the law, but was, in any case, not fatal to the present appeal.  In that case, the Tribunal held that the assessment was made on the date upon which it was signed and checked (it did not require countersignature), but if not on that date, it was made not later than the date on which the details from the VAT 641 were entered into the computer system and the VAT 655 was generated.  Applying the second part of that decision, the assessment in the present appeal would be out of time.

17.	Mr Mitchell relied upon the Tribunal decision in Harris v Customs and Excise Commissioners (1994) (Decision No 11925) in which the Tribunal held that the assessment was not made until it was at the stage when it simply required clerical processing, which must be after supervisory consideration.  From that decision Mr Mitchell derived the principle that, either “made” means assess and notify, or that an assessment is made on the date upon which the VAT 655 is stamped, or the date upon which the assessment is processed, or the date upon which it is ready to be processed, or the date upon which it is countersigned.  In any one of those circumstances, Mr Mitchell contended, this appeal must succeed.  The Commissioners might say that this particular assessment did not require countersignature, but the assessment can only be “made” on the basis of the VAT 641, and this particular VAT 641 required countersignature.  The VAT 641 could have been processed without line 19, but the Commissioners chose to include that line, and the result was that the assessment in question was out of time because it had had to wait for the countersignature.  None of the assessments on that form could have been processed without the countersignature, and therefore none of the assessments could have been issued.  Further, he submitted, Mr Wilcox might have chosen not to countersign the form, in which case the entire form would have been invalid.

18.	The provisions of Notice 915 (referred to above) were, Mr Mitchell contended, ultra vires the Commissioners.  The Commissioners explained in that Notice what they were proposing to do in the future, and summed it up thus:

“To avoid any uncertainty, where for example an assessment is ‘made’ in time but you are not notified until after the time limit for assessing has expired, we will always apply time limit rules to the ‘notified’ date rather than the earlier ‘made’ date.”

It was contended that it was ultra vires the Commissioners to introduce time limits by reference to the date of notification if the statute applied time limits to the date upon which an assessment is “made”, and the Commissioners could only ever do this if the date of notification were the same as the date upon which the assessment was made.  In Notice 915, therefore, the Commissioners have recognised the possible unfairness of basing an assessment on a date other than the date of notification.  If the Commissioners are entitled, in the exercise of discretion, to interpret time limits as applying to the date of notification, they are obliged to exercise their discretion in favour of the Appellant in the present appeal, so as to administer the tax fairly.  It is unjust and inequitable, Mr Mitchell submitted, to apply time limits to the Appellants on the basis of a date on which an internal document was initially signed.

The Commissioners’ contentions

19.	The statutory provisions, Miss Foster submitted, supported the following four propositions:  first, that the concept of assessment is separate from that of notification; secondly, that there is a time limit upon assessment but none on notification; thirdly, that the procedure for assessment is not a matter of statutory prescription, but is an internal matter for the Commissioners according to their policy and practice; fourthly, that once an amount of tax is assessed and notified it is due and recoverable from the taxpayer. 

20.	It was accepted that in those cases in which a countersignature was required the countersignature marked the end of the assessment process: see Classicmoor Ltd v Customs and Excise Commissioners [1995] V&DR 1.  But in cases where no countersignature is required, and is therefore not a necessary part of the process, the assessment is complete when it has been calculated, recorded, and checked.  It was also held, in Cheeseman (t/a Well in Tune) v Customs and Excise Commissioners (2000) (Decision No 16466) in the Tribunal that a countersignature was not necessary in all cases, that where it is necessary then that is when the assessment is made, but where it is not, as in the present appeal, the assessment is made and complete on the signature of the assessing officer, following Classicmoor.  That finding was not disturbed on appeal to the High Court (see [2000] STC 1119).

21.	It was reaffirmed in Le Rififi, Miss Foster submitted, that assessment of an amount of tax said to be due and the notification to the taxpayer are separate events.  It is clear from section 73(1) that the time limit applies only to the assessment, not to notification.  It was only from the notification that the taxpayer could discover what assessment had been made.  It was essential to remember that both forms VAT 641 and VAT 655 may, and in the present appeal did, contain numerous assessments:  the statute speaks only of “an assessment”, in the singular.  The Appellants’ contention, that the making of an assessment involves both assessing and notification is inconsistent with the way the draftsman used the language in section 73(1), as the Court of Appeal has said in Le Rififi, indicating that assessment and notification are two separate statutory concepts.  It is also inconsistent with section 73(9), because it is only on notification that the assessment becomes a recoverable debt.  In the Post Office case, at page 757, Potts J distinguished between the making of an assessment and the notification of it.  There was nothing in the statute that advanced the Appellants’ argument in this appeal, in fact to the contrary.  An assessment is not assessed; what is assessed is an amount.  An assessment is made; it is an internal process.  When everything has been done that is necessary to make it a proper assessment according to internal procedures, then an assessment is made.  It was argued that the test in Royal Bank of Scotland was that so long as a mistake can be made, or cannot be corrected it is not an assessment.  But that is not the test, because an assessment can be corrected at any time.  The taxpayer does not know that an assessment has been made until it is notified. 

22.	In Royal Bank of Scotland, it was not entirely clear what “countersign” was supposed to mean.  On the evidence in that case it was impossible to decide if all had been done to make the assessment valid.  On page 7 of the decision, the Tribunal said,

“It has been authoritatively stated that assessment and notification are separate processes.  While this might be regarded as self-evident in the purely physical or mechanical sense it is in this Tribunal’s view not possible to hold in the absence of evidence that a final assessment has been made prior to the notice of assessment leaving the Respondents’ premises.  Notification would take place when the Appellants received or were deemed to have received the notice of assessment and plainly that involves a different action from making an assessment itself.  However, although we do not decide the case on the following ground it was difficult for this Tribunal to be persuaded even with the benefit of the authorities cited to us, that the intention of the statute was other than that ‘assess and notify’ in section 73(2) of the VATA 1994 was to be considered a single act and not two acts separated by time.  The various cases to which we were referred do not in our view assist further.

Miss Foster contended that the statement that the case was not being decided on the ground which followed, that the making of the assessment involved assessing and notification, shewed clearly that that statement was obiter.  As the last paragraph of the decision shewed, the Tribunal found that there was not enough evidence to decide that a valid assessment was made prior to the date of notification.  Miss Foster adopted the reasoning of the Tribunal in Classicmoor at paragraphs 22 to 24.

23.	As to Notice 915, Schedule 11 to the 1994 Act gave care and management of the tax to the Commissioners, including power or discretion to remit tax, especially when pursuing unpaid tax.  Section 73 incorporates a discretion: assessment is not compulsory.  

The Appellants’ reply

24.	In reply, Mr Mitchell contended that by including line 19 in the VAT 641 the Commissioners had tied their own hands.  The amounts in the other lines could not be said to have been assessed when they were incapable of being processed without the countersignature on line 19: the VAT 641 could not have produced an assessment without that countersignature.  Since the assessments were all incapable of being processed they could not have been “made” until the date of the countersignature.  The VAT 641 was a nonentity without the countersignature.  The verb to assess means to calculate or quantify, but “an assessment” means more than simply calculating.   

Conclusion

25.	The first, and principal, issue which we have to determine is whether the assessment relating to the period 12/94 was “made” within the time limited by section 77(1)(a) of the 1994 Act.  The essential facts, which are not in dispute, are that that assessment was included in a form VAT 641 which contained 19 lines.  Since the prescribed accounting period in question was 12/94, under section 77(1)(a) the assessment had to be “made” not later than 31 December 1997.  The form VAT 641 was signed by the assessing officer on 24 December 1997, and by the check officer on a date which is indistinct but was clearly in December 1997.  The officer’s own evidence was that it was on 24 December.  Line 19 of the VAT 641 differed from the other lines in that it related to a misdeclaration penalty and that an inhibit was therefore placed upon that line.  Because there was an inhibit, the VAT 641 required a countersignature.  The countersignature was not imposed until 2 January 1998.  The form VAT 655, the notice of assessment, was dated 13 January 1998.  The issue to be determined is whether the assessment was made on 24 December 1997, as the Commissioners contend, or, as the Appellants contend, on either 2 January 1998 when countersigned, or 13 January 1998 when notified to the Appellants.

26.	The legislative provisions do not define in so many words the moment at which an assessment is made.  Section 73(1) refers to an assessment and the notification to the taxpayer of that assessment.  It would seem logical that an assessment cannot be notified to a taxpayer until it exists, and that it cannot exist until it has been made.  The word “made” is first used in section 73(6), when the time limit is introduced: an assessment “must be made within the time limits provided for in section 77....”  The word is used again in section 77(1).  Several decisions of the Tribunal and in higher courts have dealt with the meaning of “made” in this context, in a number of different evidential circumstances.

27.	The first of these decisions, chronologically, was Babber (t/a Ram Parkash Sunderdass) v Customs and Excise Commissioners [1991] VATTR 268.  In those days the Commissioners’ procedure in assessing and notifying was somewhat different from what it is now.  It is described briefly in the decision at page 275D:

“There is no statutory requirement that an assessment should be in any particular form, but it is provided by paragraph 4 Schedule 7 to the Value Added Tax Act 1983 that once an assessment has been made it should be notified to the person concerned.
The resultant practice has emerged that assessments are notified to a trader by sending him the Trader’s copy of the Form VAT 191.  There is no doubt that this document contains the disputed decision and gives rise to a right of appeal.
. . .
We also find that this decision was recorded in the original of the document 44 which was a Notice of Assessment made ready for onward transmission to the LVO for batching and despatch to the VCU and to the trader.  [The Appellant] submitted that the date of the assessment was the date of the date stamp impressed at the time of batching, but [counsel for the Commissioners] contended that it was the date on which the decision was recorded and countersigned....

Although there is considerable force in the contention of [the Appellant], we reach the unanimous conclusion that the date on which the assessment was made is the date on which the decision to assess is recorded together with the amount of the assessment and on which this record is countersigned and dated....”

28.	In Classicmoor Ltd v Customs and Excise Commissioners [1995] V&DR 1 at page 9 the Tribunal considered the question of when an assessment is made:

“First issue: when was the 1991 assessment “made”?
(22)	The relevance of this is that Customs and Excise must necessarily have had evidence of facts sufficient to justify the making of the 1993 assessment by 22 or 23 April 1993 when the officer’s assessment was completed; if, therefore, the making of the 1994 assessment took the form of the completion of the officer’s assessment countersigned on 20 April 1994, it could have been in time for the purposes of Schedule 7 paragraph 4(5)(b) [of the 1983 Act].  If, however, it was made on a later date, for example when notified, it will have been out of time.

23.	It was argued for Classicmoor that an assessment is only made when it is notified to the taxpayer.  I do not agree.  I accept that there could be a good practical case for deferring the time of assessment until notification has taken place.  However, if that had been the intention, the wording of paragraph 4 would have made this clear.  Instead the words of subparagraph 4(1) and (2), the provisions conferring the power to assess, speak of assessment and notification as two distinct acts.  When therefore one asks, in the context of subparagraph 4(5) when the assessment was ‘made’, the answer must, in my view, be - the time when the Commissioners carried out their statutory power to assess and not the later time when they notified the taxpayer of what they have done.

24.	In my opinion therefore the assessment was ‘made’ when the Commissioners through their officers carried out their assessment functions.  The power to assess is given to the Commissioners by, for example, subparagraph 4(1) and the actual procedure for assessing is left to them.  It is usually exercised in the privacy of the LVO.  The procedure involves the taking of the decision to assess, followed by the completion of the officer’s assessment and concluding either with the signing by the assessing officer or, as here, with the countersigning by another officer.  The act of assessment will have little effect, other than to satisfy the statutory time limits, until the taxpayer is notified in compliance with the concluding words of paragraph 4(1) and (2).  Until notification the taxpayer is under no liability to pay; nor does the right of appeal arise.  Once notification of the assessment is made the position entirely alters.  The right of appeal arises and if it is not exercised the amount due becomes recoverable.  The therefore find that the 1994 assessment was ‘made’ on 20 April 1994 when it was countersigned by the assistant collector.”

The fact that that was a case concerning provisions of the 1983 Act corresponding with section 73(6)(b) of the 1994 Act makes no difference to the principle.  Classicmoor was followed by the Tribunal in that part of the decision in Cheeseman which was not disturbed on appeal.

29.	It was also submitted for the taxpayer in The Post Office that assessment included notification of assessment to the taxpayer.  In that case the assessment had to have been made on or before 30 September 1992 in order to comply with section 22(1) of the Finance Act 1985 (which imposed a six-year time limit).  The notice of assessment had been dated 30 September 1992, and notification took place on 1 October 1992.  Potts J said, at [1995] STC 749, 755j:

“In my judgment the assessment could not have been made at a date later than the notice of assessment, which is dated 30 September 1992.  A distinction must be made between the making of the assessment and the notification thereof.  This follows from the relevant legislation which distinguishes between the making of an assessment and the notification thereof.”

In that judgment Potts J was following the decision of the Court of Appeal in Le Rififi, in which Millett LJ said, at page 110,

“The power of the Commissioners to assess the amount of VAT which is due is contained in paragraph 4(1) of Schedule 7 to the Value Added Tax Act 1983.  The power is (1) to assess the amount of tax which is considered to be due and (2) to notify the taxable person.  These are distinct operations.”

30.	Considerable reliance was placed by the Appellants upon the Tribunal decision in Royal Bank of Scotland, and in particular on the passage cited above, which came immediately after the Tribunal had cited the passage from Potts J’s judgment in The Post Office.  The important words in that part of the Tribunal’s decision, it seems to us, are, “there is insufficient evidence to establish that an assessment was made prior to 5 January 1999.”  That date was the date of the notice of assessment.  In particular there was no evidence in that case as to whether the VAT 641 required to be countersigned or had been countersigned, save a bare assertion in the statement of case that a final assessment had been made on 14 December 1998.  That was the reason for the Tribunal’s decision. That is a very different state of affairs from the present case, in which there is ample evidence shewing when the VAT 641 was signed and checked, that it was required to be countersigned, and the date of countersignature.

31.	Mr Mitchell also referred to Harris v Customs and Excise Commissioners (1994) (Decision No 11925), in which the Tribunal held, on page 9,

“The form [641] does not show the period to which the assessment refers and so there was no indication to Mr Morris [the supervising officer] that there was any time pressure for the consideration of the assessment.  He did not proffer any explanation why there was no countersignature on the form.  Had there been a countersignature no doubt the adjoining information would have been completed and so the form would show the date when it was approved to be entered in the computer for the formal issue of an assessment.  From Mr Morris’s evidence I understand that the officer’s assessment of [?on] form 641 is provisional until it has been examined and approved.  That accords with the Tribunal finding in Babber.  The Babber Tribunal referred to countersigning and dating.  Following Burford v Durkin I would not enforce such stringent terms if there was other evidence of the approval which would have led to a countersignature.  In my judgement the assessment has not been made until it is at the stage when it simply requires clerical processing.  That must be after supervisory consideration.  Until then the Commissioners have not made a decision and the assessed amount has not been finally determined. 

31.	From the decisions and authorities mentioned above, we conclude that the assessment and notification of assessment are two distinct acts.  An assessment is made when the Commissioners have done all that is required to be done other than generating the VAT 655 and notification of the assessment to the taxpayer. That includes signature by the assessing officer and checking and signature by the check officer.  If the form is required to be countersigned, it also includes countersignature, but if there is no such requirement the assessment is, of course, made without countersignature.

32.	The next question is, whether, since the VAT 641 in this case did require a countersignature, the assessment in respect of the period 12/94 was “made” before 312 December 1997 notwithstanding that the form was not countersigned until 2 January 1998.  The Appellants’ contention is that since the VAT 641 required a countersignature, and did not receive it until 2 January 1998, all the assessments contained in that form fall with the one in line 19 that required the countersignature.  The Commissioners say that each line represented a separate assessment, and since the line which referred to the assessment for the period 12/94 did not require to be countersigned the assessment in respect of that period was complete and was made on 24 December 1997, or in any event on or before 31 December.

33.	At first sight it appears to us that the Commissioners’ contention is correct.  The nature of the VAT 641 is, on the face of it, that it contains a number of assessments and does not simply embody a single “global” assessment.  Each assessment is quantified separately, and corresponds with the separate sums shewn in the assessment schedule.  The purpose of the separate lines, it seems to us, is so that separate assessments can thus be shewn.  The notice of assessment is actually headed “Notice of Assessment(s)”, and states, “The Commissioners of Customs and Excise have made assessments for tax and interest, where appropriate.”  That notice is the document into which the information in the VAT 641 is translated, and the assessments are shewn separately in it.  The VAT 641 only gives rise to the means of notification of the assessment or assessments.  If an individual assessment amongst others is “made”, because all that required to be done has been done in respect of that assessment, it seems to us that the fact that another, separate, assessment on the same VAT 641 requires to be countersigned does not affect the assessment that has been “made” without the countersignature.

34.	We find that the decisions on this point are of assistance.  In Le Rififi (supra) at page 110h Millett LJ said,

“The next question is whether each of the forms constituted notice of a single assessment or of several assessments.  This is easily answered by an examination of the form.  The rubric at the head of the form notifies the taxpayer that the Commissioners of Customs and Excise ‘have made the following assessment(s) of tax for the period(s) shown’.  The form is plainly designed to be used for a single assessment for a single period or for several assessments for different periods.  The obvious inference from the layout of the form is that each of the ten lines represents a separate assessment, so that if only one line is filled in there is one assessment, and if several lines are filled in there are several.  If there were any doubt about this, it would be dispelled by the heading above the column of monetary figures, which is ‘assessments’ in the plural.  I do not know how the person responsible for designing the form, or the assessing officer responsible for completing it, could have made it any plainer that each of the completed lines represented a separate assessment for the period shown.... Nor do I understand why the assessing officer should have divided up the amount of the assessment and allocated it to different accounting periods if he was intending to make a single global assessment in respect of the entire period.”

It would appear that the form referred to by Millett LJ was not identical with the notice of assessment in the present case, and perhaps more nearly resembled the VAT 641 than the notice of assessment.  However, the essential points are clear, and as his Lordship pointed out earlier on the same page, no particular form of notification is prescribed by statute.  This passage was cited and adopted by Potts J in The Post Office, who added that form VAT 655, like VAT 191, made provision for notifying on the same form more than one assessment.

35.	It is therefore clear that, even when a number of assessments is included in a single notice of assessment, each of them remains a separate assessment.  The same must, therefore, be true where a number of assessments is included in a single VAT 641: each is a separate assessment.  It would offend common sense were it otherwise.  If each is a separate assessment, then each is “made” when the requirements for making an assessment are fulfilled in a manner which is appropriate to the particular assessment.  If a countersignature is required, then the assessment is not made until the VAT 641 is countersigned.  But if no countersignature is required, then the assessment is complete after it has been signed by the assessing officer and the check officer.  That, in our judgment, is so even if there should be one or more amongst a number of assessments on the same VAT 641 which do require countersignature.  In our view, the fact that in such a case the countersignature is imposed after the three-year period limited by section 77(1) does not affect the assessments which do not need to be countersigned.  In the present case, in our judgment, all the assessments on the VAT 641 were “made” on or before 31 December 1997 except line 19, which required countersignature, and that was not “made” until 2 January 1998.  

36.  In our view, there is nothing ultra vives in the Commissioners’ proposal, in Notice g15 (see paragraph 18 above); not, in our view, does it affect this appeal.  It is no more than a means, applicable to all, of avoiding litigation on the point.

37.	For the above reasons, this appeal must be dismissed.  The Commissioners said at the hearing that if they were successful they would not be seeking an order for costs.  Accordingly, we make no direction as to the costs of this appeal.

ANGUS NICOL
CHAIRMAN

RELEASED: 8 May 2003

LON/98/809