V5.159 Disclosure of VAT under/overdeclarations

Part V5 Compliance, enforcement and appeals

V5.159 Disclosure of VAT under/overdeclarations

V5.159 Disclosure of VAT under/overdeclarations

A taxpayer who has discovered over/underdeclarations on a VAT return which he has already submitted must take the appropriate corrective action. The action required will depend on the gravity of the error and the degree of culpability on the part of the taxpayer. The flowchart below sets out the tests required when determining the form of the corrective action; the subsequent paragraphs set out the methods by which the action is made.

Method 1—VAT over/underdeclarations not exceeding a specified amount

A person may correct his VAT account1 if, in relation to all understatements or overstatements of input tax or output tax discovered2 during a prescribed accounting period, the net amount due to, or due from, HMRC does not exceed £50,000. This is subject to the proviso that if the Box 6 figure (value of supplies) of the VAT return is less than £5,000,000, the net amount must not exceed 1% of that figure unless it is £10,000 or less3.For the manner in which the VAT account is corrected, see V3.419 (accounting errors in relation to input tax) and V3.506 (accounting errors in relation to output tax).

No correction is required, or may be made, where:


    •     a period of four years has elapsed since the end of the prescribed accounting period in which the error to be corrected occurred, and


    •     the correction has not been made before the end of a prescribed accounting period during which that four-year period has elapsed4

This restriction does not apply where

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