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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 non careless errors

Not every inaccuracy will result in a penalty, people do make mistakes. Provided a person has taken reasonable care to complete a return or other document correctly there will not be a penalty, even if the return or other document turns out to be wrong.

Note: for guidance on reasonable care, see CH81120.

However, if a person discovers a non-careless error, HMRC would expect that they will take steps to correct it.

If the person does not take steps to correct it, the inaccuracy will be treated as careless and a penalty will be due,

There are two methods a trader can use to correct errors in previously submitted VAT returns, these are:

Separate notification

Where the net value of the errors is greater than the relevant limit, errors must be corrected by making a separate notification in writing to HMRC, either by letter or form VAT652.

For full guidance on separate notifications and the relevant time limits, see VAEC7120 and VAEC7180 respectively.

Notifying us of the error is taking reasonable steps to inform us of the inaccuracy. No penalty will be due. This is the case even if the notification is delayed until the end of the prescribed accounting period in which the person discovers the error so that they can determine whether or not a return adjustment can be made.

Return adjustment

If the net value of the errors is below the relevant limit a person can adjust their VAT account and include the net value of the adjustment in the VAT return for the period of discovery. See, VAEC7140 for further guidance on return adjustments.

The VAT return may not be due until some time after the error is discovered. However provided that

  • the errors were made despite taking reasonable care, and
  • the appropriate adjustments were made to the VAT account at the time of discovery,

HMRC will treat the person as having taken reasonable steps to correct the inaccuracy. No penalty will be due, see

  • VAEC7680 concerning careless errors
  • VAEC7700 concerning deliberate inaccuracies.