V3.506 Accounting errors
Error not exceeding £50,000
Regulations1 made under VATA 1994 Sch 11 para 2(10)(b) provide that a taxable person may correct his VAT Account2 in relation to all understatements or overstatements of input tax or output tax discovered by him during a prescribed accounting period, provided that the difference between underdeclarations of liability3 and overdeclarations of liability4 does not exceed £50,000. This is subject to the proviso that if the Box 65 figure of the VAT return is less than £5,000,000, the difference must not exceed 1 per cent of that figure unless the difference is £10,000 or less. It is also subject to the proviso that the “error” must not be deliberate; if it is deliberate, the procedure described under “Error exceeding £50,000” below must be followed6.
If the amount of any understated output tax exceeds the amount of any overstated output tax, the amount of the excess is entered as a positive amount in the tax payable portion of the trader's VAT Account7. If the amount of any overstated output tax exceeds the amount of any
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