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HMRC internal manual

Compliance Handbook

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HM Revenue & Customs
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Penalties for Inaccuracies: Types of inaccuracy: Correction of errors for indirect taxes

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

Several indirect tax error correction regimes allow

in previously submitted returns to be adjusted in the return for the period in which the errors are discovered. The errors can be adjusted in the later return only if they fall within certain monetary limits. See CH81142 for details of the limits. Deliberate errors are outside the error correction regime.

This applies to the error correction regimes for Value Added Tax, Insurance Premium Tax, Air Passenger Duty, Landfill Tax, Climate Change Levy and Aggregates Levy. An error correction regime does not exist for direct taxes.

If the errors cannot be adjusted in the return for the period of discovery, the person

  • must notify HMRC of the errors in writing, and
  • must not make an adjustment for the errors on a later return.

Despite the error correction regime, penalties may still apply to the careless inaccuracies in the earlier return(s) that led to the adjustments.

Errors made despite taking reasonable care

If a person discovers an error in a return after it has been sent to us and that inaccuracy was not careless at the time the return was sent, it will be treated as careless (and a penalty may be due) if the person does not take reasonable steps to inform us of the inaccuracy, see CH81080.

Where the error

  • was made despite taking reasonable care, and
  • is adjusted under the error correction regime in the return for the period of discovery,

we treat the person as having taken reasonable steps to inform us of the inaccuracy and no penalty will be due.

Careless errors

Some tax returns do not identify that corrections have been made for under-/over-declarations from earlier periods. For these taxes making an adjustment for earlier, careless, errors in a return for the period of discovery is not a disclosure, see CH82410, for the purposes of the penalty rules. Careless inaccuracies, even if they are adjusted in the return for the period in which they are discovered, will therefore require a separate notification if the disclosure is to be considered as unprompted.

Other tax returns do carry boxes that show the amounts under-/over-declared from earlier periods. For these taxes an entry in either box will be an unprompted disclosure of any careless inaccuracy that gave rise to all (or part of) the adjustment. A separate notification is not required.

CH82420 gives guidance on unprompted and prompted disclosure.

Deliberate errors

Deliberate, see CH81150 and CH81160, errors do not qualify as errors that can be adjusted in a later return under the error correction regime. A person should make a full disclosure to us of deliberate inaccuracies in previously submitted returns.