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HMRC internal manual

VAT Assessments and Error Correction

From
HM Revenue & Customs
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Error correction for VAT: Correction methods: Monetary limit examples

Example 1

Godfrey makes annual VAT returns for prescribed accounting periods ending on 31 December. He makes a net error of £5,000 in his annual return for the period ended 31 December 2007.

Godfrey discovers the error in August 2008, i.e. in the prescribed accounting period beginning on 1 January 2008.

Godfrey discovered the error in an accounting period that began before 1 July 2008. He can adjust his VAT account and include the net value of the adjustment in his VAT return for the period for the discovery, if the net value of the errors is £2,000 or less.

As the net value is £5,000 Godfrey cannot make a return adjustment. He must correct the error by making a separate notification, either by letter or form VAT652. See VAEC7120 for guidance on separate notifications

Example 2

Talulah makes quarterly VAT returns for prescribed accounting periods ending on 31 March, 30 June, 30 September, and 31 December. She makes a net error of £8,000 in her quarterly return for the period ended 30 June 2008.

Talulah discovers the error in November 2008, that is, the accounting period beginning 1 October 2008.

Talulah discovered the error in an accounting period that began on or after 1 July 2008. She can adjust her VAT account and include the net value of the adjustment in the VAT return for the period of discovery, if the net value of the errors does not exceed the greater of

  • £10,000, or
  • 1% of the box 6 figure required on the VAT return for the period of discovery, subject to an upper limit of £50,000.

She can either correct the error by

  • making an adjustment in their VAT return for the quarter ended 31 December 2008, see VAEC7140, or if she chooses
  • make a separate notification of the error, see VAEC7120.