Commentary

V7.285 Error correction procedures

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.285 Error correction procedures

Part V7 Tax planning | Commentary

V7.285 Error correction procedures

The new penalty system introduced by HMRC in relation to VAT returns due on or after 1 April 2009 means that some errors could be subject to a penalty, even where the business makes a disclosure of the error to HMRC or corrects the error on its next VAT return.

The following is a summary of the key phrases that are relevant when dealing with VAT errors.

  1.  

    •     All errors discovered by a taxpayer must be corrected as soon as they are discovered (or noted in the VAT file to be corrected on the next VAT return submitted by the business if the net value of the errors is below certain limits). This means that all errors are within the 'error correction' procedures.

  2.  

    •     Certain errors can be corrected by a taxpayer on his next VAT return – if the net value of the errors is:

  3.  
    1.  

      –     less than £10,000, or

    2.  

      –     less than £50,000 and also less than 1% of the Box 6 outputs figure on the VAT return on which the errors are being corrected

  4.  

    •     If the net value of errors discovered by a taxpayer is above these limits, they cannot be adjusted on a VAT return. An 'error notification' must be made to HMRC to advise them of the errors – this can either be done by completing Form VAT 652 or by writing a separate letter giving full details of the various errors and the periods to which they relate.

Method

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