400 feet and continuing in anticipated direction
When using mode C to assertion whether a level is vacant or not 400 feet seems sensible. An aircraft is occupying a level if it’s within 200 feet so to stop a mid air collision adding another 200 feet and continuing in the anticipated direction seems a good idea. Using pilot reports of vacation are inherently fraught with danger as it requires positive action from the pilot who might forget to execute the manoeuvre.
The main thing to remember from an ATC point of view is that you have to monitor the mode C read outs and ensure separation is never less then 1000 feet.