A quick Guide to Correcting VAT Errors
VAT is often a source of pain and discomfort for many people in business. The reason being very few lay people have an in depth understanding of how the taxation system works. Hence it is likely that businesses that opt for a DIY approach to their accounts may unwittingly make mistakes on their returns.
It is not uncommon for errors to occur when making VAT returns. The view that HMRC takes on errors is dependent on whether the error is considered to be an oversight, deliberate or a careless mistake. It is important to be mindful that HMRC have the discretion to impose financial penalties on reported errors.
Rectifying mistakes in VAT returns
There are two methods for correcting VAT errors that have been made in accounting periods that ended in the last four years can be amended. The size of the financial discrepancy does in itself dictate how the error can corrected.
- Sums less than £10,000 and up to £50,000 can be corrected self corrected when making your next return.
- Errors of £50,000 or more must be reported to HMRC. A Notice of Voluntary Disclosure will have to filed explaining how the error occurred the sum due plus any outstanding interest.
It is advisable to seek advice or consult a tax adviser if you realise that there are mistakes in your VAT returns. A DIY approach to completing your VAT return could save your business money in the short-term but cost you more in the long-term.
