VAT Error Correction: Can I Fix a Mistake?

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VAT error correction can be costly and confusing. Today’s Friday Tax Tip will provide some guidance to alleviate the burden.

VAT Error Correction
VAT Error Correction

(4 minute read)

Errors under £10,000

If the net sum of errors is below £10,000, you can simply adjust for them in your next VAT return.

However, adjusting for a mistake does not count as notifying HMRC. This means that you could still incur penalties if HMRC later discovers the mistake themselves.

Always formally notify HMRC when you need to rectify a VAT error. You can do this by filling out a VAT652 form or writing to HMRC directly.

You can set yourself up for the best VAT error correction by being upfront and honest. If your mistake was not caused by carelessness and you took reasonable care with your return, you may avoid penalties altogether.

Errors between £10,000 and £50,000

You can adjust these errors in your VAT return when they are below 1% of the box 6 figure.

The box 6 figure is the value of your business sales and other outputs, excluding VAT. For more information about filling in your VAT return, check the government guidance here.

For example, let’s say that your box six figure is £100,000. As long as your errors are below £1000, you can simply adjust for them in your VAT return.

However, you can’t adjust through a VAT return if your net errors exceed 1%.

If this is the case, you must notify HMRC of your error through a VAT652 form or in writing.

Errors over £50,000

You must notify HRC about any errors over £50,000 via a VAT652 form. 

Additional VAT Error Correction Guidelines

  • Unless otherwise stated, you have four years to correct a VAT return error, beginning from the end of accounting period where you made the error.
  • Although the VAT MOSS system is no longer used, you can still amend any errors until 31st December 2021. This means that you have until the end of this year to get your figures in order.
  • If you have made an error deliberately, you should also contact HMRC as soon as possible to rectify the situation.

Contacting HMRC About VAT Error Corrections

Contacting HMRC as soon as possible is key to securing the best outcome. If notifying via post, send your VAT652 form to BT VAT, HMRC, BX9 1WR. You can also notify HMRC via e-mail at inbox.btcnevaterrorcorrection@hmrc.gov.uk.

If you have sent notification to HMRC but haven’t received any confirmation of this within 21 days, you should call HMRC. This ensures that you know if the notification hasn’t arrived or been processed so you can re-send it.

If your accounts are managed by an accountant, such as the Tax Expert team, we will take care of contacting HMRC. We will also be able to negotiate on your behalf to make sure you incur the lowest penalties possible.

Call us at 01772 788200 and book a consultation to see how we can help you avoid VAT errors and deal with them if they do arise.

Kind regards Ilyas