How to assess and correct: Assessment procedures: Completing form VAT641
Completion of the VAT 641
The VAT 641 should be completed from a template found on New Penalties website using the NPS Penalty Toolkit, and captured to the trader’s folder in EF.
Boxes must be completed as follows:
Trader’s name and address
To be completed by the officer raising the assessment. If you are aware of a change in details, you should ensure that VAT 12 action is completed before the input of the VAT 641.
The three digit code (formerly LVO code) associated with the customer’s registration number on VISION
Continuation pages used
This box is completed automatically
This box will automatically total the number of detail lines completed for the assessment.
The VAT 641 can accommodate 9 detail lines and, by using the continuation sheets, further detail lines are available to a maximum of 99.
Keying operator’s stamp
This should be stamped on the paper version of the form printed out by the VALID officer who keys the document into VALID.
Trader’s registration number
Surname of the officer to be inserted. Initials and title may also be inserted but a space must be left between each item. This name will appear on the output document as a reference for the trader. It will not be retained on the database for statistical or management purposes.
Complete line number
This is the prescribed accounting period in which the error occurred. There is a facility to be able to complete a maximum of 10 detail lines per accounting period.
Any VAT 641 inserted with more than 10 lines per period will automatically be rejected by the VALID system and separate VAT 641s would need to be used.
Att (for Attribution code)
The completion of this box will inform the computer if the error assessed is output tax, input tax, a pre-Keith bulk assessment (no longer used) or an additional assessment. You must complete this field for each line of the assessment or the form will be rejected by the computer:
- Att code 0 = Output tax error.
- Att code 1 = Input tax error.
- Att code 9 = Additional assessment. [Previously also used for ‘bulk’ assessments, now no longer made].
Due to Revenue and Customs
Under-declarations and erroneous credits should be inserted in this column; i.e. type 0, 1, 2 and 4. (see below re Type code 4)
Due from Revenue and Customs
Over-declarations only should be inserted in this column; i.e. type code 3.
You must enter a type code for each detail line you complete:
- type code 0 - previously used for ‘bulk’ assessments. No longer used.
- type code 1 - no return has been rendered for the period and the VAT 641 is to assess any liability in excess of the prime assessment.
- type code 2 - error relates to an under-declaration of tax payable to HMRC.
- type code 3 - error relates to an over-declaration of tax due to the trader.
- type code 4 - error relates to an amount that ought not to have been credited to the trader. This is a new type necessitated by the provisions relating to inaccuracy penalties under Schedule 24 Finance Act 2007 (FA 07). It can only be used for periods subject to this regime, i.e. accounting periods starting on or after 1s t April 2008 with a due date on or after 1s t April 2009.
- Example: Trader notifies an error correction relating to input tax of £16,000 omitted from the 04/09 return. This is accepted and processed on a VAT 642. There is no penalty impact because this is an over-declaration. However an Officer subsequently visits and, looking at the period to which the error correction relates, finds that the amount due to the taxpayer was only £12,000. For the purpose of calculating the potential lost revenue we need to ignore £4,000 that related to the error credit. Using type 4 tells the VAT Mainframe to deduct that value from the total over-declared values for the period for offsetting purposes.
- On the VAT 641, used for accounting purposes only, £4,000 would be shown as due to HMRC, assessment type 4
To be completed for each line of assessment. The method codes are unchanged and are specified in the guidance attached to the VAT 641 Form.
To be completed for each line of assessment. The reason codes are specified in the guidance attached to the VAT 641 Form.
As a result of the provisions relating to inaccuracy penalties under Schedule 24 FA 07, there is a new reason code 16 - Delayed Tax, see CH82000 Penalties for inaccuracies: Calculating the penalty. There can only be one matched under- and over-declaration lines on a VAT 641 so, where there are multiple delayed tax inaccuracies involving more than 2 periods, separate VAT 641s must be used.
Example 1: the taxpayer has under-declared £6,000 in period 03/09 return and accounted for this in 06/09. The VAT 641 would have a reason code 16 under-declaration of £6,000 in period 03/09 and an over-declaration of £6,000 in period 06/09. Example 2: same £6,000 under-declaration in 03/09 but the taxpayer has accounted for £4,000 in period 06/09 and £2,000 in 09/09. Two VAT 641s would need to be completed: one showing a reason code 16 under-declaration of £4,000 in period 03/09 and an over-declaration of £4,000 in period 06/09; and the second showing a reason code 16 under-declaration of £2,000 in period 03/09 and an over-declaration of £2,000 in period 09/09.
For inaccuracies relating to periods to which the new inaccuracies penalties under Schedule 24 FA 07 apply, the behaviour type appropriate to each under-declaration must be completed:
A - error despite taking reasonable care
B _ failure to take reasonable care
C - deliberate understatement
D - deliberate understatement with concealment
U - under-assessment. Although not a behaviour, this is to be used where an additional assessment is being raised because a prime/central assessment is too low (so against Assessment type 1 lines) and an under-assessment penalty is considered appropriate, see CH81000 and CH410100.
Penalty Percentage Rate
For inaccuracies / under-assessments relating to periods to which the new inaccuracy penalties under Schedule 24 FA 07 apply, where the behaviour type is B-D or U, then a PPR must be entered against each under-declaration line.
The PPR is derived from the Penalty calculator on SEES until the New Penalty System within Caseflow is available, taking into account whether a disclosure was prompted or unprompted and the quality of that disclosure, seeCH82000 and CH450000.
The minimum and maximum PPRs per behaviour type are:
B: 0 - 30%
C: 20 - 70%
D: 30 - 100%
Schedule 24 FA 07 allows for penalties resulting from a failure to take reasonable care to be suspended, see CH83100 and CH450600. For each line on which behaviour type B is shown, this field must be completed:
- 0 - suspension not appropriate.
- 1 - penalty to be suspended.
- Even where a penalty is to be suspended, it must be assessed.
- A penalty in respect of a deliberate understatement (with or without concealment) or an underassessment penalty cannot be suspended
- NOTE. BT, PPR and Sus boxes should be left blank for periods prior to the new inaccuracy penalties and for inhibited penalties.
A penalty inhibit code must be completed for each line of assessment:
- 0 - inhibit not set:
- this code should be inserted for all over-declarations and those under-declarations which are liable to MP and for all inaccuracies for which the PLR and inaccuracy penalty is to be calculated.
- 1 - inhibit set:
- do not use 1 for over-declaration lines.
- for periods prior to the new inaccuracy (Schedule 24 FA 07) penalty provisions this code should be inserted to identify that line(s) of the assessment as not liable to misdeclaration penalty. Setting the inhibit signal will exclude that line from the misdeclaration for that period being tested for MP purposes. The amount will still be included in the gross amount of tax.
- for periods subject to the new inaccuracy penalty, the inhibit may be set temporarily, for example when a case is being referred under the evasion referral procedure but a tax assessment needs to be raised as the period is going out of time for assessment purposes. A new D print (expected to be available from June 2009) will be produced to remind managers / officers that a penalty has been inhibited.
- the authorising level for penalty inhibits should be at least one grade above that of the officer setting the inhibit
An interest inhibit code must be completed for each line of assessment:
- 0 - inhibit not set. This code should be inserted for all over-declarations. It should be used for those under-declarations where interest should be calculated.
- 1 - inhibit set. Interest should be inhibited if there is a doubt as to whether commercial restitution applies. For guidance on commercial restitution and whether to charge interest or not, see VDIM3020.
Interest calculation date
This is the calculation date of the assessment (or error correction notification).
The VAT 641 will total all the lines completed and show the overall total on the first page
Over-declared (in words)
The assessing officer should insert in words the gross over-declared amount.
To be completed by the officer raising the assessment.
Checking officer (if applicable)
To be completed by any officer checking the assessment.
To be completed by the authorising officer