VAT Error Corrections Go Digital

If an error is made in a VAT Return it is important that is it corrected and this can usually be easily done in the following Return.

There are some circumstances where larger errors cannot be corrected in a VAT Return and must be reported using HMRC Form VAT652.

In general errors of up to £10,000 or larger errors up to £50,000 that do not exceed 1% of Box 6 (net outputs) can be corrected in the next Return, but where these thresholds are exceeded then a Form VAT652 is needed.

Even where errors have been corrected on the next Return there is a risk that HMRC may charge a penalty if they discover the correction.  To mitigate this risk it always best practice to notify HMRC that a correction has been made, either by a letter or, more usually, by submitting VAT652.

This process has now been changed to allow a digital version of Form VAT652 to be submitted online.  This new process is preferable to the old, slow postal notification, especially as acknowledgement of the paper form is not always forthcoming from HMRC.

The new process is available at https://www.gov.uk/government/publications/vat-notification-of-errors-in-vat-returns-vat-652.  This allows the details to be prepared and submitted electronically when ready.

Unfortunately this service has not been extended to agents and so all accountants, HWB included, will have to continue to use the paper form, but when correcting your own errors the online method is recommended.

There is detailed information regarding error corrections in HMRC Notice 700/45, but this has not yet been updated to reflect the new online process.

As a further point, credit notes, such as for returned or faulty goods, do not constitute an error even though they amend VAT figures previously reported.  Credit notes should be included in the VAT Return covering the date of issue and do not require any further reporting.

If you have any queries regarding VAT error correction, please contact Alan Rolfe on 023 8046 1235.