Correcting VAT Errors on a Return Already Submitted
While submitting your VAT returns, mistakes can occur. Whether it’s missing an important entry or adding a wrong figure. And there are circumstances where mistakes are sometimes unavoidable. So, if you find that you have made a mi
While submitting your VAT returns, mistakes can occur. Whether it’s missing an important entry or adding a wrong figure. And there are circumstances where mistakes are sometimes unavoidable. So, if you find that you have made a mistake after submitting your VAT returns, don’t panic there is a solution. You just need to put things right or report them to HMRC, otherwise, you might have to pay a large penalty for a small mistake. For this reason, read this post till the end to find out the process of correcting VAT errors.
Cheap Accountants in London are well versed with all types of taxes including VAT. Give us a call to rectify your mistakes on VAT returns!
Correcting VAT Errors
There are two ways to correct VAT returns. First, you can correct the mistakes manually. And you can report those errors to HMRC. Let’s have a look at both processes.
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VAT servicesBook a free callHow to Correct Errors Manually?
In some cases, you can do manual corrections to your VAT return by adjusting the future VAT return with the previous one. You can do this if your error falls under one of these circumstances:
- You made an error in a return for a financial period that ended less than 4 years ago
- If your VAT had a net value (VAT that you overpaid minus the VAT you underpaid) if it is below the HMRC reporting threshold of £10,000
- You made an error mistakenly (it was not deliberate)
- The error’s net value is from £10,000 to £50,000 (it can be rectified on the next VAT return if that it is not above 1% of the box 6 figure. You can calculate your net error by subtracting the VAT that you overpaid from the VAT you underpaid.
If there’s an error or mistakes as discussed above, you can make adjustments. If not, you need to report it to HMRC.
How to Make Adjustments?
Making adjustments is a straightforward process. You can either:
- add the net value to box 4 (tax due on your business) or
- add the net value to box 1 (tax owned to HMRC)
If the errors on your VAT return don’t fall within the above criteria, you must turn to HMRC to report them. Please don’t forget to keep details of the error’s nature and the date when it took place. If you’re not sure whether the error on your VAT returns meets the above criteria or not, you can contact an accountant for help.
Cheap accountants in London offer tailored accounting and VAT services for you – all at reasonable rates. Contact us today!
Reporting an Error to HMRC
As discussed you are required to report the error to HMRC if your error doesn’t fall under the above criteria. First, you need to complete the form VAT652 and post it to HMRC. You can download it or you can contact HMRC on 0300 200 3700 and request them to provide the form VAT652 for reporting the error.
If you’re unable to get access to the VAT652 form, you can get in touch with HMRC directly through the post at:
HMRC, VAT Error Correction Team – SO864, Newcastle, NE98 1ZZ, UK
After contacting HMRC, they’ll ask you to provide some information about the error. They’d be asking about:
- the details of how the VAT error occurs
- Whether it was input tax or output tax error
- how you worked out the error amount
- the total amount of VAT that requires adjustment
- VAT amount that is underpaid or overpaid by your business in each VAT period
- Any of the mistakes reporting resulted in your business paying HMRC an amount that wasn’t due
VAT Notice 700/45 by HMRC will provide you with an in-depth guide on correcting VAT errors but it is better to talk to an accountant if are unable to correct your mistakes on VAT returns.
How Cheap Accountants in London Can Help?
Correcting VAT errors on returns that are already submitted can be complex for the one who’s new to it. If you have made an error – whether it’s a small or a big one – Cheap accountants in London will correct them manually and we will also report this error to HMRC on your behalf to keep you safe from heavy penalties. In addition, we’ll make sure that everything is accurately adjusted within the minimum time frame.
Our VAT accountants will also help you to prevent future errors on your VAT returns.
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Disclaimer: This blog provides basic information on correcting VAT returns.
How to correct a VAT error
| Situation | What to do |
|---|---|
| Net error of £10,000 or less, or up to 1% of box 6 turnover (maximum £50,000) | Correct it on your next VAT return |
| Larger error, or a deliberate one | Tell HMRC separately using form VAT652 or through your account, and pay what is due |
| Overpaid VAT | Reclaim it, normally within four years |
Interest and penalties can apply if you underpaid, but HMRC reduces penalties when you tell them promptly and the error was not deliberate. Keep a record of how you calculated the correction. Under Making Tax Digital, adjustments should be made through your software, not by editing past returns. Read our VAT guide and voluntary disclosure article.
Worked example
A business discovers that last quarter it charged 0% VAT on items that were standard rated, so it under-declared £2,400 of output VAT. The error is below £10,000, so it can include an adjustment of £2,400 in its next VAT return and keep notes of the cause and the calculation.
Common VAT errors and fixes
| Error | Fix |
|---|---|
| Wrong VAT rate on a sale or purchase | Adjust on the next return and fix your coding |
| VAT reclaimed without a valid invoice | Repay it and obtain the invoice before reclaiming again |
| Missed a sale or purchase | Add it to the next return if within the limits |
| Bad debt not yet relieved | Claim bad debt relief once conditions are met |
| Late or missing return | File as soon as possible to limit penalties |
Prevent repeats by checking your VAT codes, using valid invoices and reviewing the return before you submit. Our VAT service can handle your returns for you.
How to prevent VAT errors
- Set up VAT codes in your software and review them regularly.
- Check supplier invoices for a valid VAT number and correct rate.
- Reconcile your VAT account to your return each quarter.
- Keep a note of unusual transactions and the reason for the treatment.
- Ask your accountant to review the return before you submit it.
Practical next step
Review your last four VAT returns for errors, and correct anything you find through the right route before HMRC does. If you would like a London accountant to look at your own position, you can book a free call, and we will explain your options and give you a fixed fee before you commit.
Frequently asked questions
Can I correct a VAT error on the next return?
Yes, if the net error is £10,000 or less, or up to 1% of box 6 turnover with a £50,000 limit.
Do I pay a penalty for a VAT error?
Possibly, depending on whether it was careless or deliberate, but telling HMRC promptly reduces it.
How far back can I correct VAT?
Generally four years.
Fixed fees, paid online. Call 020 3441 1258 or get your quote now.
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