CH81141 – Types of inaccuracy: Corrections to a VAT return – Interaction with new penalties

This guidance applies to returns and documents with a filing date on or after 1 April 2009 where the return covers a tax period beginning on or after 1 April 2008 seeCH81011for full details.

The VAT voluntary disclosure regime allows errors to be corrected in a later return if the net value of the errors falls below the de minimis limit. If the net value of the errors is above the de minimis limit, the person

• must notify HMRC of the errors in writing, and
• must not adjust for the errors on a later return.

Despite this, penalties for inaccuracies may be considered in respect of the inaccuracy in the earlier return. In addition, the later return which includes the correction may itself be inaccurate. If so, you should consider whether a penalty is due in respect of the later return.

Is a penalty due?

A person may discover an inaccuracy in a return after it has been sent to us. If that inaccuracy was neither careless nor deliberate at the time the return was sent, it will be treated as careless (and a penalty may be due) if the person does not take reasonable steps to inform us of the inaccuracy, see CH81080.

For VAT purposes, if

• the inaccuracy in the return was neither careless nor deliberate when the return was made, and
• the net value of the inaccuracy is below the de minimis limit

the person may correct the error in a later VAT return. In these circumstances we will treat the person as having taken reasonable steps to inform us of the inaccuracy and no penalty will be due.

Where a penalty for inaccuracy is due, you will need to consider whether the disclosure is prompted or unprompted, see CH82420.

Prompted or unprompted disclosure

Correcting an error in a later return is not a disclosure of the inaccuracy contained in the earlier return for the purpose of the penalty rules. Careless or deliberate inaccuracies will require separate disclosure if the disclosure is to be classed as unprompted.

A person should make full disclosure to us of the inaccuracy where

• at the time the VAT return was made the inaccuracy was neither careless nor deliberate and the net value of the inaccuracy is above the de minimis limit, or
• the inaccuracy was made carelessly, see CH81140, or deliberately, see CH81150.

The penalty disclosure reduction should be calculated using the guidance at CH82400.