How Do I Correct VAT Errors

When completing your VAT return, it's simple to make a mistake. It's possible that you forgot to include something or that you got the total wrong when you totaled up the numbers. In the event that this does occur and you discover that you have made an error in a return that you have already filed, there is no need for you to freak out because it is simple to correct the VAT errors. You do not need to inform HMRC about the errors as long as certain requirements are met; rather, all you need to do to fix them is make the necessary adjustments to your subsequent VAT return.

Adjustment conditions

You are permitted to make adjustments to your current VAT return in order to repair faults on previous returns provided that the inaccuracies:

are smaller than the threshold for reporting, are not the result of deliberate action, and pertain to an accounting period that ended no more than four years ago.

The required level of reporting

The reporting threshold for net errors is set at £100,000 (ten thousand pounds). Adjusting the next VAT return allows for the correction of any net errors that do not exceed the threshold of £10,000 (as long as they also satisfy the other adjustment conditions). Errors that are greater than £10,000 (up to a maximum of £50,000) are also eligible for correction through the subsequent VAT return, provided that the error does not exceed 1% of the box 6 figure (total value of sales and all other outputs excluding any VAT).

Errors that are more than the threshold for reporting are required to be notified to HMRC. They can't be fixed by changing something on the subsequent tax return.

Making the necessary modifications

Making the necessary adjustments is easy; all you have to do is:

If you owe tax to HMRC, you should add the net value to box 1, and if you owe tax to yourself, you should add the net value to box 4.

You are also need to keep track of specifics regarding the type of the error as well as the date on which it was made. Your very own VAT needs to be adjusted, as well.

Example

Richard works in the field of landscape gardening. He is registered for VAT and produces return paperwork on a quarterly basis. When completing his year-end financial statements in December 2017, he realises that he has twice recorded a purchase invoice in the amount of $2,400 + VAT; the first time was in January 2017, and the second time was in February 2017. As a direct consequence of this, he overclaimed value-added tax by a total of £480 for the quarter ending February 28, 2017. When the issue was detected, his next VAT was the quarter to February 28, 2018, which ended on February 28. Since he did not intend to make the mistake, it occurred during the past four years, and it is still within the threshold for reporting, so he can amend it in that return. The figure of £5,360 that was found in box 1 for the time, which represented the amount of value-added tax that was owed for the period on sales and other outputs, was reached before the error was corrected. It is necessary for him to add £480 to the figure in box 1 in order to make up for the amount that was incorrectly claimed in the earlier return. As a result, his revised box 1 total is now £5,840 (which is £5,360 plus £480).

Reportable mistakes

There are some mistakes that cannot be fixed by making adjustments to the VAT return. Errors that are more significant than the reporting threshold, that occurred more than four years ago, or that were made on purpose are required to be reported to HMRC. Notifying the HMRC's VAT error rectification team (for contact information, see this page), either on form VAT652 or by mail, is one way to accomplish this.

When the error was the product of carelessness or dishonest behaviour on the part of the customer, interest or penalties may be assessed.

Inform is ready to assist you in any way possible, so please get in touch with us if you require additional information on this or any other tax-related topic.