Correcting Errors on VAT Returns

HMRC has recently introduced significant changes to how taxpayers must correct errors on their VAT returns. The most notable change is the removal of form VAT 652.

Going forward, taxpayers must make corrections through their online HMRC account, or by submitting a detailed error correction notification letter.

How do you correct VAT errors and adjustments?

You can correct errors in returns for the preceding 4 years, as long as the net value of the errors is either:

• £10,000 or less
• between £10,000 and £50,000 but less than 1% of the total value of your sales

For these kinds of errors, make an adjustment or correction in your next return.

You must tell HMRC separately about net errors that are:

• over £50,000
• over £10,000, if they exceed 1% of the total value of sales
• deliberate errors

How do you calculate the net value of errors?

To work out the net value of your errors on previous returns, you must:

• add up the total amount of VAT due to HMRC
• subtract the total amount of VAT due to you

You must report deliberate errors separately – you cannot include them in this calculation.

How do you tell HMRC about an error?

When notifying HMRC of an error correction, you should use HMRC’s online error correction service.

If you are unable to use the online service you should write to the VAT Error Correction Team by post:

BT VAT
HMRC
BX9 1WR

Notifications in writing must include your VAT registration number.

Whichever method is used to notify the error, the following details should be provided:

• how each error arose
• the VAT accounting period in which it occurred
• if it was an input tax or output tax error
• the VAT underdeclared or overdeclared in each VAT period
• how you worked out the VAT underdeclared or overdeclared
• whether any of the errors resulted in you paying us an amount that was not due
• the total amount to be adjusted

Once HMRC has processed your error correction, a notice confirming the amount and any interest calculated on it will be sent. HMRC may charge interest on underdeclared VAT.

For additional information, see HMRC guidance.