We’re all human, so there will be occasions where you make an unintentional error on your VAT return. So if you do suddenly realise you’ve made a mistake, what do you do?
The official line from HM Revenue & Customs (HMRC) is as follows:
- If the mistake was something accidental, and the overall amount in question is below £10k, then you just correct the error on your next VAT return.
- If the amount is more than £10k, you have to fill in a declaration and send it to the Error Correction Team at HMRC. They will correct it and will send you a bill/refund based on the circumstances of the error.
HMRC will apply interest and penalties on these kinds of errors. There’s a sliding scale of penalties, depending on whether their team judges that:
- The error was caused by ‘a lack of reasonable care’, where the penalty will be between 0% and 30% of the extra tax due.
- The error was deliberate, where the penalty will be between 20 and 70% of the extra tax you’re due to pay.
- The error is deliberate and concealed (i.e. that this was fraudulent), where your penalty will be between 30 and 100% of the extra tax due.
If you tell HMRC more about why the error happened, it's possible to reduce your penalty, but you’ll need to make a full and detailed disclosure to Error Correction team.
The potential for errors is one very good reason to ask your accountant to look after your VAT returns. As a tax expert, your accountant will be familiar with the VAT rules and will fill out the right numbers for you – reducing the worry and stress of any potential penalties.
If you think any gremlins may have crept into your VAT return, we can help resolve the problem. Give us a call on 01454 300 999, or drop an email to firstname.lastname@example.org