Some Quick VAT Advice :)
When recently completing a company's VAT return, it was noticed that VAT amounting to £60,000 had not been reclaimed in relation to a period 3 returns ago (i.e. the £60,000 would have been correctly treated had it been claimed 3 returns ago).
This VAT was claimed during the recent return, and HMRC have now queried the "high" reclaim amount on the recent return.
Should this have been suject to a voluntary dosclosure given the size of the "error"?
Is it even an "error" at all? (since the position is now correct)
Obviously I willprovide full details to HMRC, however I am concerned there will be a penalty re taking "reasonable care" in relation to errors.
Surely HMRC have better things to spend their time on? i.e. areas where they are actually losing revenue?
With thanks!
Volunary Disclosure
I believe the current threshold is £10,000. I.e. if the net VAT discrepancy is more than this (which £60k most definitely is) then you can't use the rule that allows you to correct on a subsequent return and you have to do a voluntary disclosure instead.
Yes it is an error - the original VAT return was incorrect.
I would guess they would be more inclined to penalise if it was £60k undeclared output VAT!
I think it's right that they check up on things like this - what if there was an error that resulted in a repayment that wasn't due? If you look at it this way, they are checking that they aren't losing revenue.
Damn, I've just done a post in favour of HMRC. I will go wash my hands and vow not to do it again for some time!
10,000 threshold
I agree with above. If the error is more than £10,000 then you are meant to obtain form VAT 652 from HMRC and send it to them, or write a letter detailing the mistake, and they will then make the correction for you and let you know how much you owe them.
If the turnover exceeds £1m then the self correction limit becomes 1% of your turnover.
See notice 700/45 re: advice on above.
Hope that helps and fingers crossed!
Sid
Sudipta Moore - Director, Moore Accountancy For Your Personal and Small Business Accounting Needs http://www.mooreaccountancy.co.uk
Possible VAT inspection
Agree with the above, re the need for voluntary disclosure.
It's quite possible that you'll have a VAT visit, due to the amount in question, even though you've done a self-correction.
Louise
Quite normal
Any abnormal activity concerning a substantial amount, especially if it gives rise to an unusual reclaim situation, is likely to precipitate a query. It should, as you say, have been a voluntary disclosure, by which means you would have been able to explain the reasons up front.
I don't quite follow your 'something better to do' argument given the amount involved. How much do you think an abnormal claim should reach before they have the temerity to query it?