How to Amend a VAT Return

Every VAT registered business is required to submit VAT returns every three months. However, as with any area of accounting, mistakes can occur. Whatever the reason behind the mistake, in the eyes of HMRC, it’s your responsibility to correct any errors, and there are certain procedures you must follow to do so. The good news is that the process for amending a VAT return is usually relatively straightforward, and, assuming the mistake is not due to careless or deliberate behaviour, you are unlikely to incur any penalties.

Identifying an error 

When submitting VAT returns, there are several opportunities for mistakes to creep in. For example, you may realise after submitting that you mistakenly omitted a receipt or a payment, charged a customer the wrong rate of VAT or made an error in your calculations. It may even be that a supplier sent you an invoice showing the incorrect amount of VAT, and you paid it.

Whatever the reason, it’s important to act fast once you’ve spotted an error. There are various situations in which HMRC may impose penalties, and if HMRC themselves spot the error before you’ve reported it, that penalty could be much higher.

Reporting an error to HMRC 

There are a number of ways in which you can report an error to HMRC. The simplest way would be to adjust a future VAT return to take the error into account. It will be possible to do this if the error relates to an accounting period that ended less than four years, falls below HMRC’s £10,000 reporting threshold, and wasn’t deliberate.

If these criteria are met, you can add the net value to box one of your return if you owe VAT or box four if you’re due a refund. It’s important to keep a record of the date of the error and details of what happened, as well as recording the date on which you adjusted. You should also change your own VAT records to reflect the correct figures. 

If the total value of any errors is between £10,000 and £50,000, you may also be able to make the adjustment on your next return. However, that total value must not be more than 1% of the total value of your sales and other outputs shown in box 6 of your next return.

If the value of the error is above those thresholds, you must report the error to HMRC directly. 

Reporting errors outside thresholds

You must report errors that don’t meet the above criteria to HMRC’s VAT Error Correction Team, either by letter or by completing form VAT652. 

Completing the form is the easiest way and will ensure you provide all the necessary detail. However, if you opt to send a letter, be sure to include essential information such as how and why the error occurred, the dates of the accounting period the error refers to, whether it was an input or output error, and how much you owe or are due to be refunded, including calculations, and the total amount of VAT to be adjusted.

How to avoid a penalty

The best way to avoid a penalty is to inform HMRC once you discover an error. The organisation has the power to impose various penalties for errors above £10,000 in value. Careless mistakes can face penalties of up to 30% of the value of the error; deliberate errors up to 70%, and deliberate and concealed errors can face penalties up to 100% of the value of the error.

HMRC are usually of the opinion that most errors are careless, so penalties tend to range from 0-30% if they are applied.

If you think you have been given an unfair penalty then read our blog post on how to disagree with tax decision by HMRC.

How to adjust your VAT return in AccountsPortal

There are 2 ways to adjust your VAT return in AccountsPortal:

Late Entry Transactions: when you create a new VAT report, AccountsPortal will automatically checks to see if you have transactions dated before the Start Date that have not yet been included in previously saved reports. In almost all cases, this is a result of you entering late transactions after you have already prepared and saved a report for the period. You can then choose it include these transactions in your VAT return.

Manually edit your VAT return: once you have saved a VAT return, you can choose to manually edit the values. This must be performed before you submit your VAT return to HMRC - once it has been submitted, you will not be able to edit the return in AccountsPortal.