You can make adjustments to correct errors that are:
- below the reporting threshold
- not deliberate
- for an accounting period that ended less than 4 years ago
You must report any errors that do not meet these conditions to HM Revenue and Customs (HMRC).
You can adjust your next VAT Return if the net value of the errors is £10,000 or less.
You can also adjust your next VAT Return if your error amount is up to 1% of your box 6 figure (up to a maximum of £50,000).
You must report the error to HMRC if it’s above the reporting threshold.
Calculate the net value
To work out the net value of the errors:
- add up the additional tax due to HMRC
- subtract the tax you’re due
You must report deliberate errors separately - you cannot include them in this calculation.
How to make the adjustment
When you submit your next return, add the net value to box 1 for tax due to HMRC, or to box 4 for tax due to you.
- keep details about the inaccuracy - for example the date it was discovered, how it happened, the amount of VAT involved
- include the value of the inaccuracy in your VAT account
HMRC has detailed guidance on correcting your VAT Return.
Contact the VAT Error Correction Team if you need help making corrections.
HMRC may charge you penalties and interest if an error is due to careless or dishonest behaviour.
You should tell HMRC about careless errors separately in writing, as well as adjusting your current VAT Return. This may lead to a reduction in the penalty.