How to Correct Errors & Make Adjustments or Claims on Your VAT Return

Previously filed VAT returns or while filing your VAT returns of the current period, you may find some common errors, adjustments are being made to correct those errors and sometimes you claim your amount too, when you pay high amount of taxes to HMRC.

Types of VAT Return Errors and How to Fix Them?

There are different types of errors found in VAT returns filed before or to be filed by the businesses. The most common errors found are as follows –

• Errors found in records

  • If errors found in VAT records- If you noticed that your VAT records contain errors, you should try to correct those errors as early as possible. If you are not able to understand how to correct the errors, you must take help from our VAT helpline number 03300291110 or you can also contact your own tax advisor. You may be liable for penalty or criminal prosecution, if you deliberately failed to correct an under declaration of VAT.
  • If I calculated my VAT incorrectly – It raises the question that what will happen if you will record an entry in your business records incorrectly.

    If you noticed that you put an entry in your business records incorrectly	What you need to do?
    In case, If you made the error but not yet completed the VAT return for the period	You have to amend your records. Keep a note with you showing the reason of the error, correct VAT figure you entered in your VAT account for the current period (Previously filled wrongly). Then, it will show you correct VAT figure.
    In case, you already sent the return to HMRC.	You should contact HMRC as early as possible via a letter or an e-mail to tell them the details of the inaccuracy noticed by you. It may help you in reducing the penalty too.

• Errors found on an invoice

  • If the wrong amount of VAT is shown on an invoice – If the VAT amount is shown wrong on an invoice, it will change the total amount or the price of the product. You can correct it by - where you made an arithmetic mistake in calculating the tax value, VAT charged on supply where no VAT was due.
  • If the amount of VAT shown on an invoice you issued is wrong – It raises a question that what will happen if the amount of VAT shown on an invoice issued by you is wrong and how you will correct it.

    If the amount shown on issued invoice was wrong	What you need to do?
    Very high	Account for the higher amount in your records
    Very low	Account for the amount you should have charged

  • If the amount of VAT shown on an invoice you received is wrong – It also raises a question that if you receive an invoice and the amount of VAT is incorrect. What you will do?

    If the amount shown on a received invoice is wrong	What you need to do?
    Very high	Contact your supplier for a change in invoice by reducing the amount of VAT charged.
    Very low	Contact your supplier for a change in invoice by increasing the amount of VAT charged.

Reporting Threshold

You can adjust your VAT return –

• If the net value of the errors is £10,000 or less.
• If your error amount is up to 1% of your 6 digit figure (maximum of £50,000)

If it is above the reporting threshold of £50,000, you must report to HMRC regarding the error.

Adjustments

To correct your VAT return errors you done in the past, you must adjust your account under the following conditions –

1. If the amount of errors is below the reporting threshold (i.e. £50,000)
2. If it is not done purposefully.
3. If it is for an accounting period ended less than 4 years ago.

Note – Your VAT return errors should meet these above conditions. If any error does not meet these conditions, it should be reported to HMRC.

Calculating the net value

To calculate the net value of errors, you must do the following –

• Add up the additional tax due to HMRC.
• Subtract the tax you are due with. You must not include deliberate errors in this calculation as they will be reported separately.

How to make the adjustments?

While submitting your tax return, add the net value for tax due to HMRC in box 1 or to box 4 for tax due to you. To make adjustments -

• You must keep all the details of inaccuracy. For ex – The date it was observed, how it occurred and the amount of VAT involved.
• You must include the inaccurate amount in your VAT account.

HMRC has given detailed guidance so that you can easily correct your VAT return. If you made an error in VAT return and it is due to carelessness or dishonest behavior, HMRC may charge you with penalties & interest. You can write to HMRC separately regarding the careless errors you have done as well as adjusting your current VAT return. It may help in reducing your penalty.

Note – If you need any help in correcting your errors of VAT return, you can contact VAT correction team of DNS associates by calling 03300291110.

Errors you must report to HMRC

The errors which you must report to HMRC to correct them and which cannot be settled by doing adjustments to your VAT return are as follows –

• If the amount of error is above the reporting threshold (£50,000)
• If a mistake is done by you purposefully
• If the error made in any accounting period that ended less than 4 years ago.

How to Report the Error?

To report the error, you must fill the form VAT 652 and send the same to the VAT error correction team. You can also send a letter to the VAT error correction team by including all the information requested in the form VAT 652. As a response, HMRC will send you a notice telling you that whether the amount you calculated is correct or not, any tax or interest you owe or not. You will also get a statement showing your current balance. If VAT error correction team does not responds you within 21 days, contact the VAT correction team as early as possible to make sure whether HMRC has received your correction or not.

How to Claim Refund If You Have Paid Extra Tax?

If you have paid extra tax to HMRC, there is a solution to it so that you can claim your refund. You can claim your refund in the following ways –

• You can do that by adjusting your return for the period in which it is overpaid.
• You can claim a refund by making an error correction notification.

If you are not sure, whether you are entitled for claim or not, you can ask us by calling DNS associates VAT helpline number 03300291110.

Conclusion

Every business calculates the VAT amount, makes a return and sends it to HMRC. Not every return but some of the returns may contain errors and it is good for you if you solve the same by making adjustments as early as possible before sending it to HMRC. If VAT return containing errors are received by HMRC once, it may leads to charges and penalties.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.