What to do if you made a mistake on an earlier VAT Return

This guide explains what you have to do if you discover that you've made an error on a VAT Return that you've already submitted to HM Revenue & Customs (HMRC). It tells you how and when you have to tell HMRC, and how to make adjustments in your return and accounts. It also tells you when an adjustment is considered to be part of normal accounting and is not an error.

You cannot correct errors to your VAT Returns online or by phone, you must do so by writing to HMRC.

If you've made a mistake on a previous VAT Return you might be charged interest or even a penalty, so it's important to act immediately.

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Act now if you find an error on a VAT Return you've already submitted

It is essential that you keep accurate records, and that your VAT Returns are completed correctly. If you find that you've made mistakes in a return that you've already submitted, you must correct them using the steps described below.

Step 1: Check the end date of the VAT period when the error was made

You can only correct errors that arose in VAT accounting periods that ended no more than four years ago.

This time limit does not apply to errors in the amount of VAT on the return immediately before or immediately after the return for which the amount was due. These can be corrected at any time.

Step 2: Take care when correcting errors

You must take reasonable care when correcting errors. If you are careless or deliberately inaccurate when you correct an error on your return, or when telling HMRC about a correction, you may be charged a penalty.

Step 3: Find out and record how the error occurred

You should investigate how the error occurred and make a note in your VAT account as described in step 4.

Errors made despite taking reasonable care

For how to correct errors that were made even though you took reasonable care, see the section in this guide on what to do at the end of your accounting period. You don't need to let HMRC know about these separately when you find them.

Careless errors

In all cases, if you find that you’ve under-declared or over-claimed tax as a result of careless behaviour you should tell HMRC separately if you wish to be considered for a reduction or suspension in any penalty imposed. See the section in this guide on how to tell HMRC about errors.

Also, please tell HMRC if you’ve corrected that error on your return. It is important that you tell HMRC if you have already corrected the error, or that you will be correcting the error otherwise you may be assessed for tax and interest.

Provided the net value of such errors discovered in a period is below the relevant limit, a careless error can still be adjusted in the VAT Return for the period of discovery and you will not be charged interest. See the section in this guide on what to do at the end of your accounting period.

Deliberate inaccuracies

If you find a deliberate inaccuracy in a previously submitted return, you must tell HMRC immediately. You cannot adjust these errors in a later VAT Return, and so should not include these when calculating your net error at the end of the accounting period. See the section in this guide on how to tell HMRC about errors.

Step 4: Record the error in your records

On discovery of the error you should record and date your discovery of the error in your VAT account, along with full details of the error.

Read more about correcting errors on previous returns in VAT Notice 700/45

Find out more about the penalty for errors in tax returns and documents (PDF 48K)

Find technical guidance on what is reasonable care, and what are careless and deliberate errors

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Action you must take at the end of your VAT accounting period

At the end of your VAT accounting period, calculate the net value of all the errors you found during the period that relate to returns you've already submitted - that is, add together any additional tax due to HMRC, and subtract any tax you should have claimed back. Don't include any deliberate errors - you must tell HMRC about these separately. What you do next depends on whether the net value of the errors is greater than the error correction reporting threshold. This is the greater of:

  • £10,000
  • 1 per cent of the box 6 figure on your VAT Return for the period when you discover the error - subject to an upper limit of £50,000

If the net value of previous return errors is less than this threshold then, if you prefer, you may correct the errors by making an adjustment on your current VAT Return - see the section in this guide on how to adjust your VAT Return.

But if the value of the net VAT errors discovered is above this threshold, you must report them to HMRC separately and in writing - see the section in this guide on how to tell HMRC about errors.

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How to adjust your VAT Return

You can correct certain errors whose net value is below the error correction reporting threshold by adjusting your VAT Return.

At the end of the VAT period when you discovered the errors, adjust your own VAT account of output tax due or input tax claimed by the net amount of all errors. Make sure that your VAT account shows the amount of the adjustment you make to your VAT Return.

Then, adjust either box 1 or box 4 on your return, as appropriate. For example, if you discover that you didn’t account for VAT due to HMRC of £100 on a supply that you made in the past, add £100 to your box 1 figure on your return.

If you discovered more than one error, use the net value of all the errors to adjust your return.

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How to tell HMRC about an error

You need to tell HMRC, in writing, about certain errors. You cannot correct errors to your VAT Returns online or by phone. The simplest way is to use form VAT 652 'Notification of Errors in VAT Returns', but you can include the details in a letter instead.

You must explain each error in detail by reference to your business records, including:

  • how the error happened
  • the VAT period when the error was made
  • whether it was an error on input or output tax
  • how much VAT was under- or over-declared
  • how you worked out the error
  • whether you're claiming a refund of an overpayment
  • the total amount of the error

If you've underpaid or overclaimed VAT, you may have to pay interest.

Please send your completed form VAT 652 or letter to:
VAT Error Correction Team
HM Revenue & Customs
3rd Floor
Regian House
James Street
Liverpool
L75 1AD

Obtain form VAT 652

Find out more about paying interest on late or undeclared VAT payments

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Time limits for correcting errors

You can only correct net errors below the error correction reporting threshold if they were made in returns where the accounting period ended less than four years ago. But if the errors are errors in the amount of VAT on the return immediately before or immediately after the return for which the amount was due this time limit does not apply.

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Claiming refunds

If you believe you've paid more VAT than you should have done, you may only make an adjustment using the methods described in this guide.

Where your net error is above the error reporting threshold and results from an over-declaration of output tax - that is, you have overstated the VAT on your supplies due to HMRC - your claim will not be paid if this would result in your 'unjust enrichment'. Unjust enrichment would happen if, for example, you passed on a mistaken VAT charge to a customer and you did not lose out as a result.

If this is the case you may be able to make arrangements to reimburse any VAT refund to your customer if your customer bore the cost of the mistaken VAT charge. However, If your customer was also registered for VAT and was able to fully deduct your VAT charge as their input tax then they did not bear the cost of the mistake.

If your claim for a repayment is turned down, you can appeal.

Find out how to appeal against decisions made about your VAT affairs

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Other VAT adjustments or claims that are not considered to be errors

Errors in your VAT accounting in your current VAT period

If you've made arithmetical mistakes in your VAT accounting for VAT due in the current VAT period that haven't yet found their way onto a VAT Return then you may simply correct the error in your current records and VAT account. If you failed to account for VAT due in the current VAT period, or failed to claim input tax entitlement due in the current VAT period, again you may simply correct the error in your current records and VAT account.

Other adjustments and claims

You may sometimes need to make adjustments as part of your normal VAT accounting, even if you haven't made an error. These include:

  • Retail Scheme adjustments
  • adjustments under the Capital Goods Scheme for input tax on computers, land and buildings acquired for use in your business
  • an approved estimation procedure
  • partial exemption annual adjustments, including clawback and payback adjustments
  • exports and supplies between European Union countries, including removal of goods from the UK
  • issuing or receiving credit and debit notes
  • claims for bad debt relief
  • adjustments for expenses before registration and after de-registration

To find out more about these adjustments, read the following guides.

Read about retail schemes

More about the Capital Goods Scheme in VAT Notice 706/2

Read about partial exemption

Find out about supplies to other EU countries

More about adjusting your VAT for credit and debit notes

Read about reclaiming VAT on bad debts

Find out about reclaiming VAT on purchases made before VAT registration

Find out about reclaiming VAT after de-registration

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Getting it right first time

Read about what you can do to avoid making errors in HMRC's guide to how to complete and submit a VAT Return at the link below.

Read about how to complete and submit a VAT Return

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More useful links

Read about keeping VAT accounts and records

More about correcting errors in VAT Notice 700/45

More about correcting errors in VAT Notice 700/12

Retrospective claims for VAT overdeclared by motor retailers

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