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HMRC internal manual

VAT Assessments and Error Correction

From
HM Revenue & Customs
Updated
, see all updates

Section 73(1) and 73(2) assessments: Introduction

Errors can occur on a VAT return and also on an error correction. This can be caused as a result of an under-declaration, over-declaration or an omission in the traders VAT account.

There cannot be an under-declaration or over-declaration of tax in an accounting period unless a return for that period has been submitted.

Usually, assessments for under-declarations are as a result of an assurance activity and will fall into two categories

  • those that are based on precise evidence, and/or
  • those based on presumptions.
      ‘under-declarations of liability’ means the aggregate of -
    (i) the amount (if any) by which credit for input tax was overstated in any return, and
    (ii) the amount (if any) by which output tax was understated in any return

    ‘over -declaration of liability’ means the aggregate of -
    (i) the amount (if any) by which credit for input tax was understated in any return, and
    (ii) the amount (if any) by which output tax was overstated in any return.

Indications of errors in the declared liability will occur at different times during an assurance activity, for example, during basic checks on a visit, upon credibility testing of the traders account or during further in depth checks that are performed.

It is important that you fully consider the credibility of the trader’s business and accounts when deciding how best to proceed in the making of an assessment.