VAT return mistakes happen for several reasons. Most common of them are inadvertent and relate to miscalculations or wrong rates applied to sales. In other cases, VAT return errors are results of wrong interpretation of VAT rules and regulations.
VAT regulations are constantly changing. Lack of training or professional support may lead to dear consequences including penalties, surcharges and frequent VAT inspections.
In most cases VAT652 should be used to report VAT errors. With any disclosure or VAT investigation, it is important to seek professional advice and guidance. If you are not sure how to rectify mistakes, speak to one of our tax advisors using the chat below or write to info@uk-accountant.com
What is a VAT652 Form?
Form VAT652 is the official way to correct VAT return errors when the amount you are correcting exceed certain thresholds.
How to correct VAT errors and make adjustments?
Form VAT652 cannot be used to correct historical mistakes. The mistake you can log into your VAT652 should comply with the following criteria:
When the net value of the errors found is more than £10,000, or 1% of the total sales figure on your latest VAT return, up to a maximum of £50,000.
Form 652 cannot be used to disclose mistakes that have already been discovered by HMRC during their investigation or VAT checks. You should follow different procedures to disclose deliberate errors. Special advice should be sought to deal with this type of investigations to avoid criminal procedure.
How to complete VAT652 form?
- Fill in the form, provide VAT number and comment to each error for each VAT filing period.
- Calculate the totals for each error.
- Submit the form to HMRC via email or post. You can send it to inbox.btcvaterrorcorrection@hmrc.gov.uk. You will receive an email acknowledgement.
What happens after submission?
HMRC will check the form and adjust your VAT records. The submission may result in repayment or payment due to HMRC. It is very likely that HMRC may conduct VAT checks and request all the supporting documents to justify your VAT claim. Depending on the circumstances, HMRC may also rule a penalty.
What is the penalty for VAT error correction?
The amount of penalties will depend on the severity and nature of the mistakes.
If the error is due to negligence: penalties can be from 0.3% to 30% of the potential lost revenue.
If the error is deemed ‘concealed’, the penalty can range up to 100% of the potential lost revenue.
In both cases, the penalties can be mitigated and reduced of the disclosure is made voluntarily and before HMRC discover them.
If the error is deemed ‘wilful and concealed’, the penalty can be up to 100% of the lost revenue.
In all of the above situations, the penalties can be mitigated and reduced if the disclosure is made voluntarily and before HMRC discover them.
Will submitting a VAT652 automatically trigger a VAT inspection?
An enquiry may be launched depending on the amounts of the disclosure. In this situation, an HMRC officer will contact you for evidence to support the disclosure: more details of the calculations, and justifications why the mistakes happened. The explanation should also include the measures the business is planning to use to avoid such errors in future.
If your comments include references to HMRC advice or notices you used over helpline or email, you should be able to provide the date and more details how the advice was received.
It is strongly recommended to seek advice from professional tax agents who can help submit the VAT652 form. If you discovered a mistake in your VAT return, and need to advise HMRC about it, contact us below.
What would normally trigger an HMRC investigation?
These are most common reasons that may flag unusual activity and trigger VAT investigation:
- Frequent errors in VAT returns
- Discrepancies between VAT return and business accounts.
- Reports from external sources
- Checks in certain sectors where VAT errors are most common
- Unusually large input VAT claims compared to previously filed VAT returns.
It is advisable to establish trustworthy relationship with HMRC and correct VAT errors in good time by submitting from VAT652 as soon as the error is identified.
How far back can I correct errors?
Corrections can be made within four years from when the error happened. It is possible to correct significant VAT errors and maintain good standing with HMRC by utilising VAT652 form properly.
If you believe that you have made errors in your VAT filings or require support with your VAT compliance in the UK, we can support. Our tax specialists will provide VAT health check to advise on measures to remedy any errors.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
Further information is available on the HMRC website.
Contact us today to find out more about how we can help you.