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Correcting errors in VAT returns

13 June 2024

Where an error on a past VAT return is uncovered businesses have a duty to correct the error as soon as possible. As a general rule, any necessary adjustment can be made on a current VAT return.

Correcting VAT Errors and Reporting Threshold Rule

Businesses must correct errors on past VAT returns as soon as they uncover them. Generally, they can make any necessary adjustment on a current VAT return. This is possible if the errors fall below the reporting threshold. The reporting threshold rule allows businesses to adjust their next VAT return. This is applicable if the net value of the errors is £10,000 or less. The threshold increases if the net value of errors found on previous returns is between £10,000 and £50,000. However, it should not exceed 1% of the total declared sales value for the return period in which they discovered the errors.

 

Notifying HMRC and Penalties

Businesses must notify HMRC separately if errors exceed either of the limits set out above or if they made the error deliberately. They should notify HMRC of VAT errors of a net value that exceed the limits for correction on a current return or that were deliberate. They can do this by making the correction online or submitting form VAT 652. Alternatively, they can provide the same information in letter format to HMRC’s VAT Error Correction team. HMRC may charge penalties of up to 100% of any tax understated or over-claimed if businesses file an inaccurate return.

 

Additional Information

If businesses find an error in accounting for VAT that this notice does not cover, they should contact the VAT helpline. This guidance only applies to declarations of UK VAT and does not apply to VAT MOSS Returns. These contain declarations of VAT due in other EU member states. To correct errors in declarations of VAT due in other member states, businesses will need to follow the rules of the relevant EU member state.

Source: HM Revenue & Customs Tue, 11 Jun 2024 00:00:00 +0100

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