As from 1 September, HMRC’s new rules mean they could trigger an interest charge even on small amounts
Another change is being made to the system of notifications of error for VAT returns. Thede minimis limit, below which errors can be reported in a simple correction to the relevant return by the taxpayer, has already been raised from £1,000 to £2,000. The new change concerns interest payable on net errors which are separately notified to HMRC (I.e. not in a simple correction to the relevant VAT return).
The current practice, as described in note 4 on form VAT 652, is to not charge a taxpayer retrospective interest on a net debit of VAT provided the error is within thede minimis limit of £2,000. However, a recent case judgment found that this was not lawful. HMRC will therefore cease the practice with effect from 1 September this year.De minimis net errors which are corrected on the VAT return itself and do not require a new assessment will continue not to attract interest charges.