How to Notify HMRC to Correct Your VAT Error?
If you spot a VAT error on a previous VAT return, make sure you take the necessary steps to correct it, otherwise, you risk penalties on top of the VAT you owe. There are two different 'routes' that can be taken to notify HMRC of an error and which one you choose will depend on your value.
Correct an Error Manually
In some cases, you can correct an error on a prior VAT return by amending a future VAT return. You can do this when the error:
● Was made on a statement for an accounting period that ended less than four years ago.
● Had a net worth below the HMRC reporting threshold of £10,000.
● Was not intentional.
● Had a net value of between £10,000 and £50,000. You can calculate your net error by subtracting the overpaid VAT from the underpaid VAT.
If the errors you made meet the above criteria, you can correct them on your next VAT return by adding the net value to your next VAT return. If the errors on your VAT return do not meet the above criteria, you should contact HMRC to report them.
When in doubt, ask your tax accountant if an error on your statement meets the above criteria or not.
Reporting an error to HMRC
If you need to report a VAT error to HMRC because you do not meet the above criteria, please complete form VAT652 and send it to HMRC. You can download the form online by clicking here or call HMRC at 0300 200 3700 and ask for a form to be mailed to you.
It is possible to submit a report to HMRC without the VAT652 form. If you are unable to access a form, you can write directly to HMRC to report an error at:
● HM Revenue and Customs
● VAT Error Correction Team - SO864
● NE98 1ZZ
● United Kingdom
When contacting HMRC, there are certain details you need to know about the errors you are reporting. So make sure you have the following on hand:
● Details of how each VAT error occurred
● the VAT accounting period in which the error(s) occurred
● the amount of VAT your business overpaid or underpaid
● How did you calculate this amount?
● the total amount of VAT to be adjusted
HMRC VAT Notice 700/45 provides detailed information on how to correct VAT errors, but you should consult your tax advisor if you have any concerns about your VAT return.
What Would Trigger a VAT Penalty?
The amount of the penalty will be precisely determined based on how the penalty arose and how promptly and transparently the taxpayer reported it to HMRC. For example, if HMRC classifies the error as 'reckless', the penalty can range from 0% to 30% of the potential loss of revenue, depending on the level of disclosure by the taxpayer. If HMRC determines that the error is "intentional and secret", taxpayers could face penalties of up to 100% of the potential loss of income.
Penalties vary from case to case as they depend not only on the error but also on the actions of the taxpayer after the error is discovered.
What Should I Do If I Receive a VAT Penalty?
We encourage anyone who may be subject to a fine from HMRC to contact a member of the Pro Tax Accountant team immediately to find out if they have grounds to appeal a fine. There are strict 30-day deadlines to appeal VAT assessments and fines, so it's important to act quickly.
PTA offers an independent and competent source of VAT advice. We are based in London, work throughout the UK and have overseas clients who need VAT advice and assistance relocating to the UK.
With VAT advice for organizations that, for whatever reason, find themselves in an unfortunate time with UK VAT, we can help. Our areas of expertise are VAT-sensitive sectors such as universities, colleges, housing associations, charities, and businesses, where VAT can be a real expense. exporters challenged by HMRC on export certificates; a real estate development where VAT-exempt activities are complex; a municipality, a cultural or leisure foundation: no matter in which industry you need expert VAT advice, you will find it at PTA.
Support from a Pro Tax Accountant!
Here is a brief description of the rules for reporting and correcting errors on the VAT return. If you would like professional tax advice on any aspect of VAT reporting or adjustment or confirmation that you comply with HMRC VAT rules, our team of experienced tax advisers will be happy to help.
For more information please contact us at 07985689912 or firstname.lastname@example.org. For a direct accounting quote, click here.