VAEC8640 | How to assess and correct: Assessment procedures: Negative tax on VAT641

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

The mainframe computer cannot make adjustments on VAT 641, 642 or 643 where the result would create a negative amount.

For example an output tax credit adjustment or input tax debit adjustment that exceeds the amount of output tax or input tax declared would give rise to a negative amount. In such cases a VAT 641, 642 or 643 would be rejected by the computer.

To avoid this or to re-input a form after rejection you should do the following

For output tax

Apply an output tax credit to the maximum possible without creating a negative; by an amount equal to the output tax declared. Apply the excess output tax credit as an addition to input tax claimable.

For input tax

Apply an input tax debit to the maximum possible without creating a negative; by an amount equal to the input tax declared. Apply the excess input tax debit as an addition to output tax payable.