Correcting errors

By Tolley
Correcting errors

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Correcting errors
  • Types of errors
  • Methods of error correction
  • Time limits
  • HMRC discovers errors
  • Adjustments which are not errors
  • VAT refunds
  • Submitting an error notification
  • Processing the error
  • Other matters
  • Appeals
  • Practical points

This guidance note provides an overview of the correct procedure that should be adopted by a business that discovers it has made an error in respect of its VAT accounting records or returns. A summary of the error correction procedure can be found in Flowchart ― correct errors on previous VAT returns.

SI 1995/2518, regs 34, 35; VAT Notice 700/45 ; VAEC7100; De Voil Indirect Tax Service V5.159V5.159C, V7.285
Types of errors

The following provides an overview of the typical types of errors and the procedure that needs to be used to correct the error.

Records

If a business ascertains that it has made an error in the VAT books and records then it will need to correct these errors. If the error has resulted in incorrect figures being declared on a submitted VAT return, the business may be able to correct the error on a later VAT return (see below). It should be noted that if HMRC concludes the business has deliberately failed to correct an under-declaration on a VAT return, the business could be liable to a financial penalty or even criminal prosecution. See the Managing serious defaulters and Overview of criminal investigations guidance notes for more information.

If the business discovers it has made an error in respect of its VAT records and the error covers a period in which the VAT return has not been submitted, it is entitled to correct the error by amending its records. The business must ensure that it keeps clear records of the adjustments undertaken and keeps supporting documentation where applicable.

Invoicing

If the business discovers it has shown the incorrect VAT amount on a sales invoice that has been issued, such as

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