One client is operating 1 business as a sole trader and another business as a ltd. company. What are the penalties/guidelines if Output VAT is processed through the wrong business? Should errors be reported immediately?
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Eh?
The guideline is that the business raising the sales invoices accounts for the output VAT it has charged.
If the error amounts to more than £5,000, it should be reported on a form VAT652. If the error is less than £5,000, it does not need to be reported, but should be corrected on the next VAT return. Presumably, you will need to deal with equal and opposite errors on both businesses.