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HMRC internal manual

VAT Valuation Manual

From
HM Revenue & Customs
Updated
, see all updates

Monetary consideration: examples of mistakes in charging VAT

Note: Actual VAT rates not used in these examples - figs. for illustration only.

Mistaken undercharge

Trader wants net receipt of £100

Trader charges £100 + £5 VAT

Trader’s VAT liability is 1/6 of (£100 + £5) = £17.50 (assuming VAT rate of 20%)

Mistaken overcharge

Trader wants net receipt of £100

Trader charges £130 (£100 + £30 VAT)

If VAT of £20 is not separately specified: VAT liability is 1/6 of £130 = £21.66 (assuming VAT rate of 20%)

If VAT of £30 is separately specified: VAT liability is £30

Failure to charge or recover VAT

Trader wants net receipt of £100

Trader fails to charge or charge made is disputed by the customer

VAT liability is 1/6 of £100 = £16.66 (assuming VAT rate of 20%)

Please see the guidance in VAT Assessment and Error Correction regarding the relevant powers of assessment.