Correct errors on your VAT Returns
You can adjust your current VAT account to correct errors on past returns if they are:
- below the reporting threshold
- not deliberate
- for an accounting period that ended less than 4 years ago
You can correct errors on your VAT returns if the net value of the error(s) is £10,000 or less. You can also adjust your next VAT Return if your error amount is up to 1% of your box 6 figure (up to a maximum of £50,000). However, you must report the error to HMRC if it is above the reporting threshold.
Calculate the net value of the error
In order to work out the net value of the errors:
- add up the additional tax due to HMRC
- subtract the tax you are due
You must report deliberate errors separately – you cannot include them in this calculation.
How to make the adjustment
When you submit your next return, add the net value to box 1 for tax due to HMRC or to box 4 for tax due to you.
- keep details about the inaccuracy (e.g. the date it was discovered, how it happened, the amount of VAT involved)
- include the value of the inaccuracy in your VAT account
HMRC may charge you penalties and interest if an error is due to careless or dishonest behaviour. You should tell HMRC about careless errors separately in writing as well as adjusting your current VAT Return. This may lead to a reduction in the penalty.
Errors you must report
You must disclose the following types of inaccuracies – you cannot make an adjustment to your VAT Return to correct them:-
- an error above the reporting threshold
- a deliberate error (e.g. a “mistake” you made on purpose)
- an error made in an accounting period that ended more than 4 years ago
How to report the error
In order to report the error to HMRC, you must fill in form VAT652 and send it to the VAT Error Correction Team. You can send a letter instead and include the information requested in form VAT652 if you prefer.
HMRC will then send you a notice telling you if the amount you calculated is correct and any interest or tax you owe. You will also get a statement showing your current balance. You should contact the VAT Error Correction Team to make sure HMRC have received your correction if you do not hear from them within 21 days.
In order to obtain further information on how to correct errors on your VAT returns, please contact Stallion Accountancy Services.