Van Boeckel v Customs and Excise Commissioners [1981] STC 290

When your records are incomplete, HMRC can assess VAT “to the best of their judgment”, and it does not have to be right. Van Boeckel sets the limits of that power: honesty, fair consideration of what was supplied, and a reasonable decision on that material. Nothing more is required, and exhaustive investigation certainly is not.

The Case Behind Every Best Judgment Assessment

Where a business’s VAT records are incomplete, unreliable or absent, HMRC does not have to prove the correct figure. Section 73 of the Value Added Tax Act 1994 permits it to assess the amount of VAT due “to the best of their judgment”. The same phrase appears in the excise and other indirect tax codes, and analogous powers exist for direct tax.

That is an extraordinary power, and Van Boeckel is where its limits were set. Woolf J’s judgment is short, and it is quoted in almost every best judgment appeal heard in the First-tier Tribunal.

The Facts

Mr Van Boeckel carried on business and was assessed to VAT. The officer did not have complete or reliable records to work from and constructed an assessment from the material that was available, using assumptions to bridge the gaps.

The taxpayer’s challenge was, in substance, that the Commissioners had not done enough. They had not carried out further investigation, had not obtained more information, and had reached a figure on an inadequate evidential base. The assessment, he said, had therefore not been made to the best of their judgment and was invalid in its entirety.

The submission is an intuitive one, and it is still made every week. It failed.

The Ratio Decidendi

The three requirements

1. Honesty and good faith. The officer must genuinely be attempting to arrive at the tax due, not constructing a figure to punish, pressure or provoke.
2. Fair consideration of the material placed before them. The officer must actually engage with what the taxpayer has provided. Ignoring evidence supplied is the clearest route to a successful challenge.
3. A reasonable decision on that material. The conclusion must be one that could rationally be drawn from what was in front of the officer.

What is not required

• Exhaustive investigation. The Commissioners need not carry out further enquiries to fill gaps that exist because the taxpayer failed to keep proper records. The burden of maintaining records is the trader’s.
• Accuracy. The statutory phrase directs attention to the quality of the officer’s judgment, not to whether the number is right. An honest, reasoned assessment on incomplete material is a best judgment assessment even if it later turns out to be substantially too high.
• The taxpayer’s co-operation to be assumed. Where the taxpayer has not engaged, the officer is entitled to proceed on the material available.

The consequence of failure

Woolf J’s formulation is stark: if the officer had done his honest best, the assessment stood; if he had not, the assessment would be treated as not having been made at all. That is why the argument remains attractive to taxpayers, success is total. It is also why the threshold is set high.

Obiter Dicta

• The observations on the taxpayer’s own responsibility. Woolf J’s comments about the position a trader puts himself in by failing to keep adequate records are explanatory of the policy rather than part of the test, but they carry considerable weight in practice and are routinely deployed by HMRC.
• The relationship between quantum and validity. The judgment distinguishes between an assessment that is invalid for want of best judgment and one that is merely too high. That distinction was not fully worked through until Pegasus Birds in the Court of Appeal, which resolved the two-stage confusion that had grown up in the tribunals.
• Remarks on the sufficiency of material. The indications about how little material can suffice are illustrative rather than prescriptive, and the tribunals have not treated them as a floor.

How the Law Developed

• Rahman v Customs and Excise Commissioners (No 1) [1998] STC 826. Carnwath J held that a tribunal should only find an absence of best judgment in an exceptional case, where the assessment was reached dishonestly, vindictively or capriciously, was a spurious estimate, or was wholly unreasonable. Short of that, the tribunal’s job is to correct the figure.
• Pegasus Birds Ltd v Customs and Excise Commissioners [2004] EWCA Civ 1015. The leading modern authority on how the tribunal should approach the appeal. Carnwath LJ directed that the tribunal’s primary task is to find the correct amount of tax, and that in all but very exceptional cases it should not be diverted into an attack on the officer’s exercise of judgment.
• Direct tax parallels. Similar principles govern HMRC estimates under s28C TMA 1970 determinations and in presumption-of-continuity cases, though the statutory language differs. See our resource on HMRC determinations.

Practitioner Application

Where a best judgment challenge can still succeed

The Rahman and Pegasus Birds gloss makes a pure best judgment attack difficult, but it is not dead. It remains viable where:

• The officer ignored material actually supplied. This goes directly to the second Van Boeckel requirement and is the strongest available ground.
• The methodology is arbitrary or internally incoherent: a mark-up applied to the wrong base, an invigilation day extrapolated across a period with a wholly different trading pattern, a sample that is not representative, or a calculation containing an arithmetical error carried through.
• The assessment is a spurious estimate rather than an attempt to arrive at the tax due, for instance a round figure with no working, or a figure that appears designed to prompt a response rather than to reflect the trade.
• There is evidence of improper motive: rare, but occasionally visible in the officer’s notes obtained by subject access request.

The better strategy in most cases

• Fight the quantum, not the officer. The tribunal’s primary task is to find the correct amount. A credible reconstruction of the trade (supplier records, till data, bank analysis, wastage, staff meals, seasonal patterns, comparable businesses) is worth far more than an attack on the officer’s state of mind.
• Remember where the burden lies. On an appeal against the amount of an assessment, the burden is on the taxpayer to show that the figure is wrong and, so far as possible, what the right figure is. Following HMRC v Sintra Global Inc [2025] EWCA Civ 1661, the same burden applies where the taxpayer disputes an underlying liability as a defence to a penalty.
• Check the time limits and the notification. A s73 assessment must be made within the statutory periods in s73(6), and s77 VATA 1994, and must be properly notified. A validity point defeats the assessment without any need to argue about judgment or quantum.
• Get the officer’s working papers. Request the calculation, the source data and the officer’s notes at the earliest stage. Most successful challenges begin with a methodological flaw visible only in the working papers.
• Deal with the pay-or-deposit rule. Section 84(3) VATA 1994 generally requires the disputed VAT to be paid or deposited before the tribunal will entertain the appeal, subject to a hardship application under s84(3B).

Frequently Asked Questions