VAEC8811 - How to assess and correct: Error correction procedures: When form VAT642 should not be used

The procedural guidance in this manual only covers the VAT Mainframe and VISION processes. For guidance on the Making Tax Digital and ETMP processes for fully migrated customers, see VAEC0200 and the Making Tax Digital for VAT compliance toolkit.

Firstly, if any changes are made to the error correction notification, a VAT641 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: 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 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.