Businesses normally do care when filing their VAT returns but still there could be an error when filing a VAT return. Where an error on a past VAT return is uncovered, businesses have a duty to correct the error as soon as possible. As a general rule, any necessary adjustment can be made on a current VAT return. However, in order to be able to do so, there are three important conditions that must be met:
https://www.gov.uk/vat-corrections
Under the reporting threshold rule, businesses can make an adjustment on their next VAT return if the net value of the errors is £10,000 or less. The threshold is further increased if the net value of errors found on previous returns is between £10,000 and £50,000 but does not exceed 1% of the box 6 (net outputs) VAT return declaration figure for the return period in which the errors are discovered.
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VAT errors of a net value that exceed the limits for correction on a current return or that were deliberate should be notified to HMRC using form VAT 652 (or providing the same information in letter format) and should be submitted to HMRC’s VAT Error Correction team.
Inaccuracy penalties:
The penalty does not apply where the taxpayer has, in the view of HMRC, taken reasonable care in filing returns but makes an innocent mistake. Where it does apply, it is calculated as a percentage of ‘potential lost revenue’ as follows:
HMRC may also charge penalties and interest if an error is due to careless or dishonest behaviour.
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