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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 80B(1B) Example 2

Section 80 claim where unjust enrichment does apply and the business enters into the reimbursement arrangements, but fails to reimburse their customers.

Business has a £6,000 outstanding VAT debt on file.

Output tax over-accounted for £10,000
   
Input tax credit wrongly claimed NIL
Net over-accounting £10,000
Outstanding VAT debt £6,000
Total credit (£10,000)
Amount reimbursed to customers NIL

In the above example, where unjust enrichment does apply and the business chose to enter into the reimbursement arrangements then they will have been credited with £10,000.

This amount will have been offset against their £6,000 debt as provided for by section 80(2A) leaving a net amount of £4,000 which will have been repaid to the business.

In the above example £10,000 has been credited to the business (£6,000 to their VAT mainframe account and £4,000 repaid) on condition that the full amount of £10,000 is reimbursed to their customers.

If the business then fails to reimburse any of this amount we must take steps to recover it from them. If we do not then they will have been unjustly enriched.

Therefore an assessment for £6,000 is made and notified to the business (under the provisions of Section 80B(1B)) to recover the amount credited to the business’s VAT mainframe account.

A further assessment for £4,000 is made and notified to the business (under the provisions of Section 80B(1)) to recover the amount physically repaid to the business.

These two assessments together recover the full amount of £10,000 credited to the business.

The processing and notification procedures for Section 80B assessments are outlined at VAEC5120.