VAT errors are more common than people think and most are straightforward to put right once they are spotted. What matters is dealing with it properly rather than hoping it goes unnoticed.
Depending on the size and age of the error, it can often be adjusted on your next VAT return. At the time of writing, HMRC allows you to adjust an error on your next return where the net value is below £10,000, or below 1% of your box 6 turnover figure up to a maximum of £50,000, and the error relates to an accounting period ending in the last four years.
Larger or older errors need to be reported to HMRC separately, using the online error correction service or form VAT652. These thresholds are set by HMRC and can change, so we always check the current position before making an adjustment.
Errors left uncorrected can lead to interest charges and, in some cases, penalties, particularly if HMRC finds the mistake before you report it yourself. Being upfront and getting it corrected properly is always the best route.
Keeping your records on cloud software and filing under Making Tax Digital makes errors far easier to spot early, while they are still small.
We review what has happened, work out the right way to correct it and deal with HMRC on your behalf where needed. Most VAT errors, once found, are resolved without drama.
A VAT error is anything that makes the VAT you have declared wrong. Common examples include using the wrong VAT rate, claiming input VAT on a non-VAT invoice, duplicating a figure, or simply transposing numbers. It also covers underpayments and overpayments, whether deliberate or accidental.
Often yes. If the net error is below the HMRC threshold, relates to a period in the last four years and was not deliberate, it can usually be adjusted on your next return. Anything above that has to be reported separately.
Not automatically. Genuine mistakes that you disclose yourself are treated far more leniently than errors HMRC finds first. Interest on any VAT underpaid is normally still due.
Generally four years. Errors in periods older than that fall outside the normal correction window, so it is worth checking the dates before you do anything.
Small, one-off errors on straightforward returns can often be corrected yourself. If the error is large, repeated, goes back several years or involves partial exemption and complex supplies, it is safer to get professional help so the correction is handled correctly and HMRC correspondence is managed properly.
If HMRC finds the mistake before you disclose it, you may face higher penalties and a more detailed review of your records. Telling HMRC voluntarily, with the correct calculation and explanation, usually leads to a much better outcome.
Get in touch and we will help you correct it properly and get your VAT returns back on solid ground.
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