How best to adjust for error on flat rate VAT return

How best to adjust for error on flat rate VAT...

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This was a new client where I did the VAT in a bit of a hurry last quarter and simply copied the entries into an existing excel template. The template didn't make allowance for the first-year 1% "discount" so the client has paid over flat rate VAT at 14% instead of 13%. The difference is just under £180 so it's not hugely material, but if I deduct this from the current quarter, it means the effective gross rate disclosed on the VAT return will be an odd % (it works out just under 12%).

Will this, in itself, flag up issues with HMRC, or should I put it in writing just in case. I've already made a file note documenting the error in case of future inspection. The box 6 figure will obviously not be affected as this is simply the gross takings in the quarter which remains unchanged.

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By sparkler
17th Nov 2012 08:35

Action you must take at the end of your VAT accounting period

At the end of your VAT accounting period, calculate the net value of all the errors you found during the period that relate to returns you've already submitted - that is, add together any additional tax due to HMRC, and subtract any tax you should have claimed back. Don't include any deliberate errors - you must tell HMRC about these separately. What you do next depends on whether the net value of the errors is greater than the error correction reporting threshold. This is the greater of:

£10,0001 per cent of the box 6 figure on your VAT Return for the period when you discover the error - subject to an upper limit of £50,000

If the net value of previous return errors is less than this threshold then, if you prefer, you may correct the errors by making an adjustment on your current VAT Return - see the section in this guide on how to adjust your VAT Return.

But if the value of the net VAT errors discovered is above this threshold, you must report them to HMRC separately and in writing - see the section in this guide on how to tell HMRC about errors.

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By Figurate
17th Nov 2012 10:05

Just do it...

Just correct it on the next VAT return.

One of my clients did something similar (they actually used the correct percentage for a couple of quarters and but had what looked like a typo in one quarter), so the VAT return that contained the correction had a very strange percentage for VAT. (Nothing terrible happened, though)

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By taxhound
17th Nov 2012 13:57

Correct on next return

My client (bless her) applied a 20% rate when calculating her liability under FRS one quarter.  We corrected in the next return.  Admittedly HMRC actually rang up after the first return and asked  what was happening, but nothing terrible happened.

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