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HMRC internal manual

VAT Accounting Manual

Use of estimation for completing VAT returns: The effect of estimation on interest and penalties

A business operating an approved estimation method will make adjustments in subsequent periods. If the adjustment is properly made - that is, it is the right amount in the right period - it becomes part of the tax attributable to that period, and will not attract interest or be liable to misdeclaration (see VCP10700) or a Schedule 24 inaccuracy penalty (CH810000).

If the business does not make the adjustment properly, because for example:

  • it has used the wrong figures or the wrong period;
  • it has made the adjustment without being approved to use estimation; or
  • it has not made an adjustment at all,

you may issue an assessment in respect of the errors, and they will be subject to the normal interest and penalty regimes.