Section 73(1) and 73(2) assessments: Tax incorrectly assessed
When traders have undercharged tax on invoices to customers, they may account for the tax by issuing amended or supplementary invoices or pay the tax from their own resources.
It is for traders to decide which course to take. You should not, under any circumstances, give instructions to issue further tax notices.
When raising an assessment, you should calculate the amount of the adjustment by applying the VAT fraction to the actual consideration as charged.
You should also advise the trader that if amended or supplementary invoices are subsequently issued, the difference between the VAT fraction and the amended amount of VAT must be accounted for.
Note: For more guidance see the VAT Valuation Manual.
If tax has been overcharged on an invoice to a customer the trader must account for it to HMRC unless the customer is given credit for the tax overcharged.
When a trader has overcharged tax you should draw this to the trader’s attention. If the trader wishes to correct the error, you should allow this correction to work through the accounting system during the tax period in which the error was discovered.
If the amount is significant, it may be appropriate to issue a reference to
- enable independent cross checks to be made on the accuracy of the receiving traders records, or
- for the next officer to check that your trader has accounted for the full amount of VAT.
For procedures to follow where a trader has charged VAT on an invoice for zero rated goods, see VAEC9600.