Oh no! What do you do if you make a mistake on your VAT return?

Properly completing a VAT return can be time-consuming and confusing. You need to decipher all the VAT receipts that you get from your employees and identify the correct amounts of VAT for VAT reclaim. It’s not surprising that your company sometimes makes mistakes when calculating your VAT reclaim.

If this happens to you, don’t panic. Under certain circumstances, you can correct errors on your VAT return.

How to correct an error on an unsubmitted VAT return

Putting in all that work to complete a VAT return, only to discover that you made a mistake, can be very disheartening, but it’s relatively simple to fix.

As long as you haven’t yet submitted it, you can make a correction within the VAT return itself. Just write down the date on which you discovered the error, how it occurred, and the correct amount of VAT for that period. Your VAT refund will be based on the corrected figure.

It’s important to keep a record of all VAT refund errors in your VAT account, to avoid making the same mistake in the future. It also demonstrates that you are generally responsible about your VAT account, helping you to reduce or avoid paying a penalty.

Can you correct a mistake on a submitted VAT return?

Under certain circumstances, you can adjust your next VAT return to compensate for an error you made in the last one, as long as:

  • The mistake was not deliberate or considered fraudulent
  • The mistaken amount of VAT is below the reporting threshold
  • Your VAT refund mistake is less than four years old

The reporting threshold for VAT reclaim is either:

  • Under £10,000
  • Between £10,000 and £50,000, but below 1% of your net outputs (the figure in box six of your VAT return for the current VAT return period)

You have to make a voluntary declaration in order to correct your previous VAT reclaim amount. There’s no way to correct an error that was found by a government VAT audit, for example. By voluntarily reporting your own error, you can reopen the VAT reclaim and make the necessary changes.

How to adjust your VAT return error

  1. Correcting an accidental error that’s below the reporting threshold
    As long as your VAT refund error was below the reporting threshold, you can correct it on your next tax return.First, you need to calculate the correct net value of VAT to add up the extra amount that you owe HMRC, or subtract the tax that is owed to you. Then include this net value in your upcoming VAT return.

    • If you owe money to HMRC as a result of your error, write the amount in box number one.
    • If there is a VAT refund due to you because of your error, then write the amount in box number four.

    Alternatively, you could complete form VAT652 and send it to the VAT Error Correction Team.

    Whichever way you choose, you should also send a separate letter to HMRC to describe the mistake that you made, how it came about, when and how you discovered it, and how much you owe or are owed as a result. If HMRC feels that you made an inaccurate VAT reclaim on purpose or through careless behaviour, they could charge you a VAT refund penalty. Writing a letter helps to convince them to reduce or remove it.

  2. Correcting an error that’s deliberate or above the reporting threshold

If your VAT refund error is above the reporting threshold, or it was made deliberately, you have to report it using form VAT652, or by writing a letter that includes all the same information. You’ll need to detail:

  • How you made this mistake(s)
  • In which accounting period you made that error
  • Whether your mistake was in input tax or output
  • Whether you overdeclared or underdeclared your VAT for that period
  • How you made your calculations
  • If you ended up paying too much VAT because of your mistake
  • The total amount that needs to be adjusted

HMRC will let you know if your new calculations are correct, and detail how much interest or tax you owe as a result. If you don’t get a reply within 21 days, you should contact the VAT Error Correction Team to make sure that they received your letter/form.

If you discover a mistake in your VAT return four or more years after you submitted it, there’s no way to correct, adjust, or report it.

Everyone makes mistakes from time to time, but using the right tools helps you make them less often. For all the details about filing successful VAT returns in the EU and other countries around the world, download our eBook.

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