HMRC 'Best Judgement' Assessments

HMRC ‘Best Judgement’ Assessments

It is a common frustration among taxpayers that HMRC can simply make up inflated figures when issuing tax assessments. While the frustration is understandable, these assessments serve a legitimate purpose.

When Are They Used?

Best judgement assessments arise when businesses or individuals have lost the records required to accurately calculate their tax liability. In these circumstances, HMRC officers use the available facts to estimate the tax due. This might involve industry comparisons, bank statement analysis, or other indirect methods of calculation.

The Tribunal’s Approach

Tribunals show little sympathy for taxpayers who cannot explain why their records have been lost. If there is no compelling reason for the loss of records — such as fire, flood, or theft — the Tribunal is likely to place significant weight on HMRC’s estimate.

How to Challenge

Taxpayers can challenge best judgement assessments through the appeals process. The key is to present credible evidence that HMRC’s figure is excessive. This does not necessarily mean producing the records that should have been kept, but rather demonstrating through alternative evidence that the assessment is unreasonably high.

When a challenge is properly made, the Tribunal will determine the correct amount and reduce the assessment where warranted. However, without credible alternative evidence, the Tribunal is unlikely to interfere with HMRC’s figure simply because the taxpayer disagrees with it.

Key Points

• Best judgement assessments exist for legitimate reasons.
• Records should be maintained to avoid being in this position.
• Challenges require credible evidence, not mere disagreement.
• The Tribunal can and does reduce assessments where the evidence supports it.
• Professional representation significantly improves the prospect of a successful challenge.