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HMRC internal manual

Debt Management and Banking Manual

VAT: repayment taxpayers: compliance


There are two sanctions available to encourage compliance by repayment customers who fail to file returns.

Withholding repayments

Repayments will be withheld where, in the preceding three years, a period is not satisfied by a return or an assessment plus an additional assessment.

Subsequent enquiries will most likely take the form of:

  • monthly repayment taxpayers who complete the wrong return and render out of sequence


  • taxpayers who fail to render NIL returns
  • taxpayers who ‘roll up’ returns, omitting to render the missing ones.

Where a repayment is being withheld or queried in any way, the amount is shown on the bottom left hand side of the LR Screen on VISION where it states ‘Claims not Posted’ and will remain there until the error or query has been actioned.

Transfer to quarterly returns

When a repayment taxpayer who is on monthly tax periods fails to furnish a return for two consecutive periods the customer is automatically transferred to quarterly tax periods. This transfer generates:

  • a VAT 3, which is scanned into the customer’s folder on EF at Southend
  • a VAT 4, which is sent to the customer direct.

Requests received from taxpayers for restoration of monthly tax periods are to be dealt with by the National Registration Service. Their guidance is contained in V1-28.

Prime Tax Assessments

The computer does not issue direct prime assessments to taxpayers who are classified as repayment. However, if it is known that there is tax due in a specific accounting period a manual tax assessment may be issued in the usual way on Form VAT 152A.

Reclassification from repayment to payment

Periodically the computer checks the returns received from repayment taxpayers and where appropriate reclassifies them as payment taxpayers.

Tell taxpayers to contact the National Registration Service if they expect to remain in an overall repayment situation. The National Registration Service will deal with each case on its merits.

In addition, the repayment taxpayer indicator may require manual amendment by the National Registration Service when:

  • a change in the taxpayer’s business pattern results in a corresponding change in classification
  • an incorrect classification is identified, resulting from misleading information being given at the time of registration.