Error correction for VAT returns: Interest and penalties, Default interest
From 1 September 2008 all assessments to recover VAT, resulting from the separate notification of errors in previously submitted VAT returns, will attract default interest when the interest represents commercial restitution, see VDIM3010 issued on 1 August 2008.
Net errors that are adjusted in the VAT return for the period of discovery, see VAEC7140, are not assessed and liability to default interest does not arise.
If you receive a separate notification of an under-declaration of VAT
- That is below £10,000, and
- The due date for the return for the period in which the error was discovered has not yet passed,
You should contact the person to confirm that they do not want to wait until the end of the return period and include the adjustment in their return, see VAEC7820.
The legislation that covers this is in VATA94/S74