VAEC5010 | Recovery assessments: Section 80(4A) and Section 78A procedures

This guidance deals with interest matters in respect of prescribed accounting periods starting on or before 31 December 2022. Interest matters with effect from 01 January 2023 are dealt with under Finance Act 2009.

Please see Compliance Handbook page CH140000 onwards to find the new interest rules guidance.

For information about retired VAT systems, go to VAEC0150. For information about Making Tax Digital for VAT and ETMP processes, go to VAEC0200.

Recovery of section 80 payments under section 80(4A)

Prepare Form VAT 641 as normal for input to VALID. Set interest inhibits for all lines subject to the Section 80(4A) assessment to prevent the automatic calculation of default interest.

Amount should be allocated to the original periods covered by the incorrect claim. This is an accounting mechanism only and serves to update/restore the trader's accounting main file record.

You are not making an assessment for the "original” periods. The VAT 641 should be marked “For accounting purposes only”. The output documents produced as a result of processing the VAT 641 must be suppressed and the trader notified of the recovery assessment by letter VAT(LC)28: Recovery Assessment - Section 80, which is available on SEES.

After 30 days you will need to check if the assessment has been paid, see VAEC5000.

Recovery of statutory interest under section 78A

Prepare VAT 641 using a “00/00” period, Attribution Code 9 and Type Code “0”. Once input, this will put the debt on file and avoid corrupting any accounting period details for penalty and interest purposes. The output document produced by the computer should be suppressed and the assessment notified by letter.

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Default interest

Code 00/00 will prevent the automatic calculation of default interest charge so there is no need to set the interest inhibit. If the Section 78A assessment is not paid within 30 days you need to follow the same procedure as outlined at VAEC5000 for default interest on Section 80(4A) assessments.

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Notification

Whether your assessment is made under Section 80(4A) or under Section 78A, we strongly recommend that you give advance warning to your VALID team to intercept the computer generated documents that will arise after processing the VAT 641, i.e. VAT 655 and VAT 667.

In addition, the normal VAT 34 Assessment Notes should not be despatched to the business. Although sending the normal assessment output documents will not invalidate the assessment, they are likely to confuse and may cause unnecessary complaint.