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HMRC internal manual

VAT Assessments and Error Correction

Type of assessment: Prime assessments information: D0904 report

A D0949 report is issued monthly to local offices listing payment traders who have returns missing in periods which are about to go out of time for assessments under the two years rule.

The traders listed may be deregistered or continuing traders. The aim of this list is to remind local staff that urgent action is required in respect of those traders before the time limit for making and notifying an assessment expires and any revenue is consequently lost.

The list may include missing period returns for traders who have been reclassified from repayment to payment. These periods may already be out of time for assessment under the two year rule.

In these cases a visit may be appropriate to establish the liabilities for the missing periods or, if no tax is due, VAT 127 pro forma nil return action may be appropriate

If a period is out of time for assessment under both the two year rule and the one year rule and the VAT return is not forthcoming, a VAT 127 nil pro-forma must be completed giving the following reason ‘Out of time for assessment, non enforceable debt estimated as £…’.

The VAT 127 should be submitted through line management for countersignature. Management must investigate the reason why the period was not assessed within the prescribed time limits and consider whether there has been a loss of VAT related revenue due to

  • theft
  • gross carelessness
  • error or negligence by a member of the department.

Once the VAT 127 has been countersigned and batched an advice regarding manual write off should be sent to Finance Policy, following appropriate Accounting Guidance.