Prior year VAT correction more than 50k

Prior year VAT error, resulting in adjustment on purchase and sales VAT

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I am working on one company's accounts and found there was unreported VAT amounts on sales and purchases,  so my question is how do I report this error to HMRC and what are the limits to report error, is there any cap on the VAT error correction amount?

Also once I send amended VAT return to HMRC, would they start investigation?

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By the_drookit_dug
11th Aug 2018 21:47

You can't send an amended VAT return. If the error was at worst careless (i.e. not deliberate), then provided the net error is below £10k, then you can adjust for it through the next VAT return. If it's over £10k, then you'll have to write to HMRC disclosing the error. (In fact, you should consider writing to HMRC even if you can adjust through the next return, as HMRC can still raise penalties for errors adjusted through returns - penalties are generally lower if the disclosure is voluntary i.e. unprompted).

Much depends upon the quality of the disclosure, so make sure you do everything you can to explain and quantify the error, with backing schedules as appropriate. It will also reduce the chances of them opening a full investigation, although they may ask for further details regarding the error.

Be sure to seek to get any errors suspended, provided they're deemed careless and not deliberate.

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