If you make a mistake on a VAT return it is important to put it right as quickly as possible. If the mistake is less than £10,000 net effect of VAT, the correction can be on your next VAT return. However that method of correction does not “notify HMRC of the mistake” and hence could still leave you in a poor position if penalties are raised. Much better is to notify HMRC separately. This can be by way of form VAT652 or better still a letter sent to HMRC (at time of writing send to HMRC, VAT Error Correction Team – SO864, Newcastle NE98 1ZZ but see VAT notice 700/45 para 4.11). A well worded letter can minimise any penalties, potentially to zero, or have penalties suspended if corrective procedures have been put in place. If you are in a position that requires a VAT correction, give us a call or book a discussion – we may be able to save you considerable hassle from HMRC and potentially considerable penalties too.
As with all of our tax tips and web pages this information is necessarily summarised and of a general nature. If you would like detailed specific advice please contact us.