AccountingWeb

Limit raised for correction of VAT errors

The current £2,000 limit below which a trader can correct his own VAT errors is to be replaced for VAT accounting periods commencing on or after 1 July 2008.

For new VAT periods, errors of £10,000 can be corrected on the VAT return, and errors of more than this amount can also be put right on the return for businesses with turnover for VAT purposes of more than £1 million (found by multiplying box 6 on the return on which the correction is to be made by four for quarterly returns, and 12 for monthly returns).

If your turnover exceeds £1 million, then the limit is 1% of turnover up to a maximum of £50,000. Errors in excess of the new limits must be separately disclosed to HMRC as before.

However, voluntary disclosure of VAT errors, as it has always been known is not disclosure for the purposes of the new penalty regime. When an error is corrected on a VAT return under the these "mistake rules", there is no requirement to notify HMRC. So a “voluntary disclosure” of a VAT error, will not meet the definition of a disclosure for new penalty purposes, and thus will not protect the trader in the event of a penalty being due. Rebecca Benneyworth explains how this works in her article this week, New penalties : When is a disclosure not a disclosure?

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