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HMRC internal manual

VAT Assessments and Error Correction

Error correction for VAT returns: Interest and penalties: Return period with a due date on or after 1 April 2009

Section 97 and Schedule 24 Finance Act 2007 introduced a new penalty regime for inaccuracies in returns or other documents, see CH80000 onwards.

The penalties apply where

  • the inaccuracy is contained in a return or other document with a due date on or after 1 April 2009, and
  • the return or other document relates to a VAT period beginning on or after 1 April 2008

A penalty is chargeable where a trader gives HMRC an inaccurate return or other document and

  • the inaccurate document amounts to or leads to

    • an understatement of the trader’s liability to VAT, or
    • a false or inflated claim to repayment of VAT


  • the inaccuracy was

    • careless, see CH81120, or
    • deliberate, see CH81150 and CH81160.

These financial penalties are graduated and the amount of the penalty for the inaccuracy is related to the behaviour that led to the inaccuracy. There are fixed upper and lower penalty percentages for each type of behaviour.

The maximum amount of the penalty percentage for each inaccuracy can be reduced depending on

  • the type of disclosure. A disclosure can be either unprompted or prompted, see CH82420, and
  • the quality of disclosure. This reflects the extent to which the trader actively participates in establishing the full amount of the inaccuracy, see CH82430.

For further guidance on the VAT error correction procedures and

  • non careless errors, see VAEC7670
  • careless errors, see VAEC7680
  • deliberate inaccuracies, see VAEC7700.

Guidance on the relationship between the correction of VAT errors and penalties can be found in CH81141 and CH81142 of the Compliance Handbook.