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HMRC internal manual

VAT Assessments and Error Correction

Prime assessments procedures: High or nil liability notified by trader

Occasionally, a trader may notify you that the amount of a prime assessment notified to him is higher than his actual liability but may claim that a return cannot be submitted.

If the local office is satisfied that the trader’s contentions are genuine, the prime assessment may be reduced. In all cases, any reductions are to be authorised as set by Compliance Pacesetter or in accordance with local agreed levels of delegation.

Where more than one assessment is being reduced, these limits apply to the total amount of the reduction.

Each letter notifying the reduction should be referred before issue to the appropriate authorising officer who, if satisfied, is to countersign 2 copies, one for the trader and one for the trader’s electronic folder.

If a surcharge has been assessed for the same period, the trader should be informed within the letter that this also has been reduced.

A form VAT163C should be included with the letter as formal notification of the reduction.

Complete a form VAT146 to amend the tax and surcharge on the accounting file. It should be noted however, that a prime assessment cannot be reduced to nil using a VAT146.

If the trader is found to be in a repayment situation, or there is no liability for the assessed period and he cannot furnish the return, a nil pro-forma return should be input using a form VAT127.

Do not authorise write-off for such a period as this would inflate the debt and therefore adversely affect the write- offs statistics.

Civil recovery

In cases involving civil recovery action, inform Solicitors Office, or the private solicitor dealing with recovery of the debt, of the true liability.