Amending a VAT return after it has been sent

Once HMRC has accepted a VAT return it can’t be changed or sent again. That is HMRC’s rule for every piece of Making Tax Digital software, not just Tax Optimiser. If you find a mistake afterwards, you correct the error instead. Small errors are put right on your next return. Larger ones, and any deliberate ones, are reported to HMRC separately. This article explains which applies to you, what to do in Tax Optimiser, and where to get help from HMRC.

Work out the net value of the errors

HMRC’s rules depend on the net value of the errors you have found on earlier returns:

1. Add up the VAT you owe HMRC because of the errors.
2. Add up the VAT HMRC owes you because of the errors.
3. The difference between the two is the net value.

For example, if you missed £900 of VAT on a sale and also forgot to claim £250 of VAT on a purchase, the net value is £650 owed to HMRC.

Keep a note of each error as you find it: the date you found it, the VAT period it happened in, whether it was VAT on sales (output tax) or VAT on purchases (input tax), and the paperwork it relates to.

Smaller errors: adjust your next return (Method 1)

You can correct the errors on your next return if the net value is:

• £10,000 or less, or
• between £10,000 and £50,000 and no more than 1% of the box 6 figure (your total sales excluding VAT) on the return for the period in which you found the errors.

The correction goes through box 1 (VAT due on sales) and box 4 (VAT reclaimed on purchases) of the return for the period in which you found the errors. Boxes 3 and 5 then pick up the difference.

In Tax Optimiser the nine boxes are read from your spreadsheet, so the correction is made in the spreadsheet:

1. In your spreadsheet for the current period, include the correction in the figures that feed box 1 or box 4. Show it as its own line so you can see it later.
2. Open the period from VAT → VAT Returns and upload the file as usual.
3. Check the boxes on screen include the correction, then click Send VAT Return.

You don’t need to tell HMRC separately about an error you made despite taking reasonable care. If the error was careless, HMRC asks you to tell them about it as well, whatever its size, so that any penalty is reduced.

Larger or deliberate errors: tell HMRC (Method 2)

You must report the errors to HMRC separately, and not adjust your return, if:

• the net value is more than £50,000, or
• the net value is between £10,000 and £50,000 and is more than 1% of the box 6 figure on the return for the period in which you found the errors, or
• the errors were deliberate, whatever their size.

You can also choose to report errors of any size this way instead of adjusting your return.

Report them using HMRC’s online service: Tell HMRC about errors in your VAT Return. HMRC will ask for:

• how each error happened
• the VAT period it happened in
• whether it was an input tax or output tax error
• the VAT under-declared or over-declared in each period, and how you worked it out
• the total amount to be adjusted

If you can’t use the online service, write to the VAT Error Correction Team at BT VAT, HMRC, BX9 1WR and include your VAT registration number.

HMRC then sends a notice confirming the amount, any interest, and how to pay or how you will be repaid. If you hear nothing within 40 working days, contact the VAT Error Correction Team to check they received it.

Nothing needs to change in Tax Optimiser for a Method 2 correction. Carry on filing your later returns as normal, without the correction in them.

Not sure which method applies? HMRC has a short checker: Check how to tell HMRC about VAT Return errors.

Time limit, interest and penalties

• Four years. Errors can be corrected for four years from the end of the VAT period they happened in. For input tax you didn’t claim, the four years run from the due date of that return. There is no time limit for deliberate errors.
• Interest. HMRC charges late payment interest if the error meant you paid too little VAT by the due date.
• Penalties. There is no penalty for an error you made despite taking reasonable care, as long as you correct it once you find it. Careless and deliberate errors can be penalised, and the penalty is lower if you tell HMRC before they find the error themselves.

Things that aren’t errors

Some changes are part of normal VAT accounting and simply go on the return for the period they happen in. They don’t count towards the limits above:

• credit notes and debit notes you issue or receive
• bad debt relief claims
• partial exemption and Capital Goods Scheme adjustments
• retail scheme annual adjustments

HMRC guidance and the VAT Helpline

The full rules are in HMRC’s guidance How to correct VAT errors and make adjustments or claims (VAT Notice 700/45). Section 4 covers errors on a return you have already sent.

HMRC can tell you which method applies to you and how an error should be corrected. Our team can help with using Tax Optimiser at support@taxoptimiser.co.uk, but we can’t advise on your VAT position.

Related: Send your return and keep the receipt.