VAEC8820 - How to assess and correct: Error correction procedures: Completing VAT642

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.

VAEC7120 provides further guidance on initially accepting error correction notifications.

Completion of the VAT 642

The VAT 642, which is available on SEES, should be completed 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 correction, for cross checking by the VALID post input control seat on receipt of the outputs.

Office Code

The three-digit code, formerly LVO code, associated with the trader’s registration number on VISION.

Lines used

This box will automatically total the number of detail lines completed for the correction. The VAT642 can accommodate 9 details lines and, by using the continuation sheet, further detail lines are available to a maximum of 72.

Continuation page(s) used

Tick box if continuation sheets are used.

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.

Registration number

This is the trader’s VAT registration number.

Officer’s name

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.

Remittance amount

If the correction was received with a payment at the Local Office, then the amount of the remittance should be inserted here. Otherwise it should be left blank.

If this box is completed, then the remittance office and date of receipt boxes must also be completed.

Date of receipt (DOR) of payment

The date the payment was received at the Local Office should be inserted here. If no payment was received, this box should be left blank.

Remittance office

This is the 3 digit numerical code for the local office which received the remittance. This may be different from the local office which is processing the VAT642.

Line No

To be completed.

Period reference

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 VAT642 inserted with more than 10 detail lines per period will be rejected by the VALID computer system.

If a period that is more than six years old is to be adjusted, you should use the period reference 00/00.

Attribution code

The completion of this box will inform the computer if the error disclosed is Output Tax, or Input Tax. You must complete this field for each line of the disclosure or the form will be rejected by the computer

• Att code 0 = Output tax error
• Att code 1 = Input tax error
• Att code 9 = Bulk (pre-Keith 111 periods only) or additional assessments?

Due to HMRC

Under-declarations only should be inserted in this column i.e. type code 0, 1 or 2.

Due from HMRC

Over-declarations only should be inserted in this column i.e. type code 0 or 3.

The following points should be noted:

• Do not set off under and over-declarations in the same period, instead they should be listed as separate items. The computer will accumulate individual line totals to give an overall total for the period.
• Enter whole pounds in the due to and due from columns. Under-declarations should be rounded down and over-declarations rounded up, however in the case of a nil net tax situation you should round the under and the over-declaration in the same way (either up or down).
• Do not enter due to and due from amounts on the same line.

Assessment Type

You must enter a type code for each detail line you complete

• Type 0 - period reference must equal 00/00. This should only be used where the correction covers periods over 6 years old
• Type 1 - additional assessments
• Type 2 - errors relate to an under-declaration of tax payable to HMRC and are liable to interest
• Type 3 - error relates to an over-declaration of tax due to the trader.

Behaviour Type

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 inaccuracies penalties under Schedule 24 FA 07 apply, where the behaviour type is B or D, then a PPR must be entered against each under-declaration line. The PPR is derived from the New Penalty System, taking into account whether a disclosure was prompted or unprompted and the quality of that disclosure, see CH82000 and CH450000.

The minimum and maximum PPRS per behaviour type are:

A: 0%

B: 0 - 30%

C: 20 - 70%

D: 30 - 100%

U: 0 - 30%

Suspension code

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.

Penalty inhibit

• Inaccuracies in documents relating to accounting periods starting on or after 1st April 2008 with a due date on or after 1st April 2009 are subject to Schedule 24 FA 07. Accounting periods that do not meet these criteria are subject to the provisions relating to misdeclaration penalty and MP does not apply. see VAT Civil Penalties guidance. This column should be left blank for periods to which Schedule 24 does not apply.
• For periods which are subject to Schedule 24, the field must be completed as follows:
• 0 - inhibit not set. This code should be inserted for all over-declarations and, subject to the following bullet, all under-declarations.
• 1 - inhibit set. 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. This is likely to occur very infrequently.
• N.B. The authorising level for penalty inhibits should be at least one grade above that of the officer setting the inhibit.

Interest inhibit

An interest inhibit code must be inserted for each line, see VDIM7000 and VDIM8050 for full guidance on setting inhibits:

• 0 - inhibit not set. This code should be inserted for all under-declarations and over-claims where interest should be assessed. This code is also usually used for over-declarations but see below.
• 1 - inhibit set. This code should be used for over-declaration on which statutory interest has been paid, see VSIM7800. This code should also be used for under-declarations and over claims where interest is not to be assessed.

Totals

Totals will be calculated automatically.

Calculation Date

This is the calculation date of the assessment (or error correction notification).

Over-declared (in words)

The processing officer should insert in words the gross over-declared amount.

Processing officer's signature

To be completed by the officer completing the VAT642.

Check officer

To be completed by any officer checking the VAT642.

Authorising Officer

To be completed by the authorising officer.