Introduction to this document

VAT voluntary disclosure of error letter

If you discover an error on a VAT return, you will need to correct it. In most cases this can be done simply by amending your next return, but where the error results in an increase in your VAT liability you should always send a letter of voluntary disclosure as this will protect you from penalties.

If you find an error of £10,000 or less

If you discover that you’ve made a mistake and misdeclared the amount of VAT due, you need to adjust it. If the errors on the return add up to £10,000 or less (or, if greater, 1% of the Box 6 figure, subject to an upper limit of £50,000), you can correct these by adjusting your next VAT return. Keep a record of the adjustment and how it was calculated, so you can show HMRC next time it pays you a visit. You should record:

(1)  the date the error was discovered

(2)  the period in which it occurred

(3)  whether it relates to input or output tax; and

(4)  where the supporting documents can be found. It’s a good idea to annotate the adjustment on your VAT analysis with the words “voluntary disclosure adjustment”.

Error over £10,000

If the error is for more than £10,000 etc., you cannot correct it by adjusting a later VAT return. Instead you must complete and send a Form 652 to HMRC. Alternatively, you could send a VAT Voluntary Disclosure of Error Letter with the details. HMRC will accept a voluntary disclosure any time before it begins “to make enquires”, i.e. before it makes an appointment to inspect your records and in certain other limited circumstances.

Note. To protect yourself from penalties you should complete a Form 652 or send a letter of disclosure where the correction results in more VAT being payable. This applies even where you have adjusted, or will adjust, for the correction on a later VAT return (because it was for VAT of less than £10,000 etc.).