VAT – Correcting errors on VAT returns
HMRC are reminding VAT registered businesses that many small errors can be corrected by making an adjustment to a subsequent VAT return, subject to the usual time limits. The reminder stresses the benefit of correcting a ‘reasonable’ error on a VAT return by making an adjustment rather than by sending a separate disclosure to HMRC.
HMRC has found that many of the mistakes which have been reported to their error correction team could have been corrected by the taxpayer. The error correction team is currently experiencing a six to eight week delay in processing corrections to VAT returns.
Taxpayers can make adjustments for the majority of small errors which were not ‘careless’ or ‘deliberate’ and usually no penalties would be due.
There is an error reporting threshold which applies to net errors above which errors must be specifically reported to HMRC. The threshold applies to the greater of:
- £10,000 or
- 1% of the Box 6 figure on a VAT Return for the period when an error was discovered, subject to an overall upper limit of £50,000.
Cases of careless errors or deliberate inaccuracies must be notified to HMRC separately and will usually be subject to penalties.