When traders miss the deadline for filing a VAT return, a ‘central assessment’ is raised by HMRC’s system. This is also known as a ‘VAT notice of assessment of tax’. 

A central assessment estimates the VAT liability due to HMRC on the outstanding VAT return. The estimate is usually based on the VAT amount owed on previous returns. Other methods of estimation may be used where HMRC does not have historic data. 

Any penalties for late payment are initially calculated based on the estimate of the VAT liability. 

Previously, when a late VAT return was submitted to HMRC, the central assessment was removed from the VAT account by the next working day. The estimate was replaced in the VAT account by the actual figures submitted. Any checks on the submitted return would take place in due course. 

HMRC has confirmed that this approach has now changed. By design, the updated process does not update the VAT account to remove the central assessment until the late return has been fully processed. If the late return is subject to compliance checks, the central assessment will not be removed from the VAT account until these checks are complete.   

If HMRC’s system does not flag the late return for additional checks, the balance in the VAT account may still be updated by the next working day. 

If a business receives a central assessment, it should endeavour to file the outstanding VAT return(s) as soon as possible.  

In some cases, it may be necessary to pay the central assessment to prevent the business from incurring additional penalties. This should also prevent HMRC’s debt management team from chasing the payment. Professional advice should be sought where necessary. 

Further reading: 

• Send a VAT Return: Late returns and payment - GOV.UK (www.gov.uk)
• If you cannot pay your tax bill on time: Overview - GOV.UK (www.gov.uk)