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Correcting VAT errors – what’s HMRC’s view?

Friday March 2016

If you discover an error you can put it right by adjusting your next VAT return. You don’t have to tell HMRC about it as long as the net amount is less than £10,000 or, if greater, 1% of the figure in Box 6 of the VAT return for the period in which you discover the mistake. The 1% rule can only be used for errors of up to £50,000. HMRC says that it will not charge a penalty for the late paid VAT as long as the errors were not deliberate and you took reasonable care in completing your VAT return.

Where the VAT for earlier returns is wrong by more than the limits mentioned above, you must write to HMRC and provide details. Alternatively, you could use HMRC’s Form 652. This can be completed online, printed and then posted to the address shown on the form.

When working out the amount of VAT to determine if you need to notify HMRC of errors, it’s only the net amount you should take into account. This is worked out by calculating the difference between:

  • the total VAT payable in respect of errors in previous returns; and
  • the total VAT repayable to you in respect of errors in previous returns.

While you only have to notify HMRC of net errors exceeding the £10,000/1% limit, if the errors are significant, e.g. underpaid VAT £40,000 less overpaid VAT £35,000, we recommend notifying HMRC anyway.  The reason for this is that it can protect you against penalties.


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