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VAT Error

Reported sales as NO VAT rather than Zero Rated

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Hi All

I have just noticed that where my client has had to manually input invoices onto Xero they have been selecting the No Vat option rather than the zero rated option.  Whilst there is no loss to HMRC obviously the sales have been understated in the last 3 returns.

I understand that there is a 1% error threshold limit regarding Box 6 but given the fact that there is no actual change to the liability/refund box, do I still need to notify HMRC of the error or can I just correct it on the next VAT return.  

I am assuming yes as the next VAT return will look very odd, but just looking for advice.

Thanks 

Replies (6)

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By Paul Crowley
20th Oct 2021 15:02

If only MTD could fix this type of error

If me I would just ignore and get future returns done correctly

Thanks (2)
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By rmillaree
20th Oct 2021 16:34

"I understand that there is a 1% error threshold limit regarding Box 6 but given the fact that there is no actual change to the liability/refund box, do I still need to notify HMRC of the error or can I just correct it on the next VAT return. "

i am not convinced you cannot simply adjust on your next vat return anyway - the 1% is the additional secondary part of the quick guide that says when you can do an amendment - are you sure you dont qualify under the fisrt part ?

https://www.gov.uk/vat-corrections

Reporting threshold
"You can adjust your next VAT Return if the net value of the errors is £10,000 or less."

Calculate the net value
To work out the net value of the errors:
add up the additional tax due to HMRC
subtract the tax you’re due

ok ading zero and zero = zero which is less than 10k - i am presuming vat paid across is correct

so fine to adjust on next vat return under this proviso no need to look at the also can do part of the equation.

If its overlapping accounts years you may be minded to write in with adjustments anway but i wouldnt be over worried nowadays about plonking onto vat return if you are allowed to based on what they say.

Note if you are planning on changing vat schemes or deregistering or are on flat rate you may specifically want to be certain that hmrc have the correct return box 6 totals on file - eg they will probably refuse vat dereg application or could throw you off the flat rate scheme due to box 6 later amendments.

Thanks (1)
ALISK
By atleastisoundknowledgable...
20th Oct 2021 17:05

Ignore and get it right in the future. Although TBH it’s (probably) not the end of the world if it continues wrong.

At one of my previous firms, for clients with ‘questionable’ records the firm had the policy of misposting Zero/Non/Exempt transactions purposely interchangeable so that if there was a vat inspection, the inspector could find an easy win and then leave satisfied that he’d found something.

Thanks (2)
Replying to atleastisoundknowledgable...:
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By Paul Crowley
20th Oct 2021 17:21

Had a client once that had the same thought process re P11d and PAYE
Let them find something quickly
His was paying the directors' home telephone costs in full
The two of them never had less than £500,000 dividend per person per year

Thanks (3)
Psycho
By Wilson Philips
20th Oct 2021 20:22

I would let sleeping dogs lie, although no doubt Basil will be along to say that if MUST be corrected, under threat of criminal prosecution.

Thanks (4)
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By kiwilondon99
21st Oct 2021 11:03

Very interested in the 1% comments re box 6.

a] does same 1% apply to inputs re Box 7

just discovered, re Box 7 historically - for many periods - on a new clients accounting/bookeeping, postings for bank payments for 'net payroll + paye' have in sage been coded to T0, where in fact these sb T9 vat codes-ie outside the scope
[ implication 10% to 19% box 4 / box 7 ]

again no effect on payable / due to HMRC

b] what is the implications for reporting 'error' fines etc
c] how does one actually 'report'

not wishing to hijack @OP - but very similar issues i guess all round . tia

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