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HMRC internal manual

VAT Assessments and Error Correction

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HM Revenue & Customs
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How to assess and correct: Error correction procedures: When form VAT642 should not be used

Firstly, if any changes are made to the error correction notification, a VAT 641 must be used. This is because under Schedule 24 FA 07 both the taxpayer-notified error(s) and any further inaccuracies identified by HMRC must be recorded and considered for inaccuracy penalty purposes.

Example 1: Using a VAT652, taxpayer A notifies an error correction relating to input tax omitted from the 06/09 return in the amount of £12,000. Upon verification it’s identified that a sales invoice showing VAT of £1,500 had also been omitted. In this case a VAT641 should be used and completed as follows;

Line 1 amount due from HMRC £12,000 Attribution code -1 Assessment Type code -3, Method code -M

Line 2 amount due to HMRC £1,500 Attribution code -0, Assessment Type code -2, Method and Reason codes as appropriate.

Example 2: An error correction notification is made by a taxpayer on a VAT652 for under-declared output tax of £12,000. It’s later discovered that the amount should have been £13,500. In this case a VAT641 should be used as follows;

Line 1 amount due to HMRC £12,000 Attribution code -0 Assessment Type code -2, Method code -M

Line 2 amount due to HMRC £1,500 Attribution code -0 Assessment Type code -2 method code as appropriate, etc.

Secondly where the taxpayer notifies an under- and over-declaration that represent delayed tax errors, see CH82390, these must be adjusted on a VAT 641 using reason code 16 to enable the VAT Mainframe to calculate the correct potential lost revenue for this inaccuracy.