correct VAT errors

How to Correct VAT Errors and Make Adjustments?

While you are working with any kind of accounting, there are chances of errors, especially while you are dealing with the submission process of VAT returns. It happens a lot when you are carrying out the plan of a small business. All you need to focus on in such a scenario is correct VAT errors. This is not always your fault, at times your supplier has sent you an incorrect invoice and you have made the wrong payment.

However, according to HMRC, it is now your responsibility to correct VAT errors. You can suffer harsh consequences with penalties and other implications by HMRC if you fail to correct the VAT errors in the right way and at the right time. HMRC has a long list of conditions which is known as the penalties for errors regime. The process of the identification of such errors and making them right is quite straightforward luckily. This guide will help you to identify VAT errors, correct VAT errors, and the penalties regime of HMRC. In the case, the nature of your VAT error is serious and falls out of the HMRC criteria, you are clearly in need of professional help.


Talk to one of our intelligent and clever professionals to get your further queries answered instantly. We will ensure to come up with the best possible solution to your problems. 


How do I identify VAT Errors?

People are normally aware of the fact that when you run a business that is VAT registered, you are liable to submit your VAT returns after every three months. The VAT account normally provides the following details for you:

  • When is the due date of your VAT returns?
  • When you should clear the payment of HMRC’s account?

VAT returns deadlines of submission through an online medium and making the payment clear comes a month and a week after your quarterly accounting period. It takes a little while for the payment until HMRC finally receives it in the account. Moreover, it is imperative to ensure the correct details of VAT. The correct amount of payment is collected and then paid is all depending on the rate of VAT.

In the case, you figured out a mistake after you are done with the process of VAT returns submission, this could be any of the following possibilities:

  • An error in the calculations of the figures
  • You have charged the incorrect rate of VAT to a consumer
  • Payment or receipt is omitted by you mistakenly

You are advised to take swift actions to sort out this issue as you will be liable to correct all the mistakes that are found in your old submissions. Sometimes you are not able to find out any mistakes but during the process, HMRC finds mistakes in the submission. You will be charged with high penalties and asked to keep a focus while you are submitting your VAT returns. Otherwise, the VAT errors found by HMRC during VAT inspection will cause you serious damage and penalties in the future.


Correct VAT Errors – Also consider the Threshold

This is advisable when you figure out a mistake in the old submission, you can correct it while you are submitting your next VAT return and you don’t have to report it to HMRC. However, consider the following listed criteria:

  • The identified VAT error was not made deliberately.
  • The created figure is still below the figure of the HMRC threshold.
  • The error was made in such an accounting period that ended before a duration of four years.

Moreover, this depends on the value of the threshold that will decide whether you can make the adjustments in your next VAT return submission or not. In case you find out that the error value is above the suggested threshold, you are now liable to inform HMRC and report the error immediately. Ensure the threshold and right way of handling the VAT errors will keep you protected from the high amount of penalties.


Reporting of VAT Errors that are Outside the Threshold

In any of the following listed cases, you become liable to report it to HMRC immediately to keep yourself protected from paying a heavy amount of penalties.

  • The value of the VAT error is falling outside the threshold.
  • You have figured out that the VAT error is deliberately made.
  • The mistakes that you have found out are older than four years.

Moreover, use the form known as VAT652  or post a letter to inform HMRC about the VAT error. You can get in touch with HMRC’s VAT Error Correction Team. You should expect the penalties in the case HMRC decides the error was a deliberate action or it’s too late to fix it. The information that you will require to provide HMRC includes the following:

  • The total adjusted amount of VAT.
  • The calculations related to the adjustment.
  • What is the kind of error? Whether it is output or input?
  • The relevant date on which the error occurred.
  • The reason for the VAT error occurred.


The Bottom Line

Now that you have gathered a fair amount of information about correct VAT errors, we can bring the discussion towards wrapping up. We can say that there are chances of VAT errors while you are going through the process of submission and this can charge you heavy fines that can damage your business reputation in the industry. Therefore, it is advisable to keep your focus intact while you are submitting your VAT returns. However, if still you find out errors that cannot be adjusted in the next submission, you should inform HMRC immediately. We hope these few minutes of reading will help you to submit your VAT returns more accurately.


If you seek professional help to learn more about correct VAT errors. Why wander somewhere else when you have our young and clever team of professionals at Accotax


Disclaimer: The information provided in this blog about correct VAT errors, including the text and graphics, in general. It does not intend to disregard any of the professional advice.

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