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HMRC internal manual

VAT Assessments and Error Correction

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HM Revenue & Customs
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Recovery assessments: Section 73(7B) assessments- goods removed from a warehouse or fiscal warehouse without payment of VAT due on goods or services

VAT due - liability guidance

See guidance VWRHS - supplies in warehouse and fiscal warehousing, Notice 702/8 Fiscal warehousing and Notice702/10 VAT: Tax Warehousing.

VAT due - the power to assess

It is open to HMRC to make an assessment under section 73(7B) VATA 1994 on the person removing goods from warehouse (or another person held liable) where it appears that those goods have been removed without payment of VAT due under section 18(4) or section 18D VATA 1994. There is nothing to preclude HMRC from making an assessment under section 73(7B) in these circumstances rather than section 73(1), as section 73(7B) is the more appropriate provision. Liability under section 18(4)(b) or section 18D VATA 1994 is not affected by the withdrawal (if any) of the relevant assessment to excise duty.

S 73(7B) includes:

“. . . they may assess to the best of their judgment the amount of VAT due from the person removing the goods or from the other person liable and notify it to him.”

This should be construed as referring to liability to VAT, not to “liability” or responsibility for removal of the goods.

Where, on being removed from a warehouse or fiscal warehouse, VAT that is due under VATA section 18(4) or section 18(D) remains unpaid, HMRC may assess the person liable to the best of our judgment.

Section 73(7B) was specifically added to section 73 to deal with non-payment of VAT on removal of goods from a warehouse. In contrast, section 73(1) applies to all taxable persons and covers failure to make VAT returns and the submission of incomplete or incorrect returns, but only where there has also been a taxable supply made within the UK. Where specific and appropriate assessment powers are available to HMRC under section 73(7B) it is more appropriate for HMRC to use these assessment powers.

An assessment is a means of seeking payment from a person on whom a liability falls; the assessment does not create the liability, but merely demands fulfilment of that person’s obligation under the legislation concerned. Section 73(7B) permits HMRC to assess to the best of their judgment “the amount of VAT due.

Section 73(B) assessments are not appropriate for the VAT 641 mainframe assessment procedure. Form EX601 should not be used to make and notify VAT assessments.

Consider a Penalty

See Compliance Handbook for guidance.

Assessment notification process

Section 73(7B) assessments must be notified by SEES letter VAT(LC)54: S73(7B) VAT assessment: removals from warehouse. Accounting for the VAT on these assessments is done through Cumbernauld Accounting team. The assessment and payment must not be placed on the VAT mainframe. Therefore, the VAT 641 mainframe assessment procedure is not appropriate for section 73(7B) assessments. Form EX601 should not be used to make and notify VAT assessments.

Take the following action:

Assessment notification letter

Contact Cumbernauld Accounting Team on 03000 583774 to obtain an assessment reference number in the format VEXA/Consecutive Number/Year. This reference number must be quoted on the letter and in all future correspondence.

Prepare an original and three copies of the assessment letter VAT(LC)54: S73(7B) VAT assessment: removals from warehouse, available on SEES.

Distribute the SEES letters as follows;

  • Original and Copy 1: Send to the trader
  • Copy 2: Using internal mail, send copy 2 of the assessment letter and the associated EX601 form to: Cumbernauld Accounting Team, St Mungo’s Rd, Cumbernauld, G67 1YZ, and include reference to this guidance page (VAEC5102)
  • Copy 3: Scan/capture to HMRC’s records for the person assessed

Accounting team

On receipt of payment, bring to account. Time to pay requests should be referred to Cumbernauld Accounting Team, St Mungo’s Rd, Cumbernauld, G67 1YZ. If the trader does not pay within 30 days of the demand letter, refer the case to the Excise, Environmental and Customs Duties (EECD) team at the National Debt Pursuit Unit in Liverpool.

Consider fraud

If you consider fraud is an issue, before demanding payment, complete form ROST A and send via your Senior Officer to the Regional Referral Team.