News and Events

Limit raised for correction of VAT errors

June 2008
The current £2,000 limit below which a business can correct its 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 Turnover for this purpose is calculated 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 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 HM Revenue & Customs 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 "mistake rules", there is no requirement to notify HM Revenue & Customs. 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 business in the event of a penalty being due.