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HMRC internal manual

VAT Assessments and Error Correction

Error correction for VAT: Credibility queries: Post repayment and allowing assessments

When a post repayment credibility query is referred to the regional office and the subsequent verification identifies that an adjustment is required, the possible outcomes are

  • there has been an under-declaration of VAT, in which case we would make an assessment in the normal manner by completing a VAT 641 or,
  • there has been an over-declaration of VAT, in which we case we would make the appropriate accounting adjustment by completing a VAT 641.

Where a post-repayment credibility check reveals that a lower repayment is due, we would make any assessment under section 73(2) VATA 1994.

Section 73(2) says

In any case where, for any prescribed accounting period, there has been paid or credited to any person-

(a) as being a repayment or refund of VAT, or

(b) as being due to him as a VAT credit,

an amount which ought not to have been so paid or credited, or which would not have been so paid or credited had the facts been known or been as they later turn out to be, the Commissioners may assess that amount as being VAT due from him for that period and notify it to him accordingly.

If, however, a repayment return reverts to a payment return we would make any assessment under both section 73(2) for the VAT credit amount and section 73(1) for the VAT due amount.