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Changes to Retrospective VAT Reporting Errors

Changes to Retrospective VAT Reporting Errors

HMRC has confirmed that businesses can no longer correct mistakes on submitted VAT returns by using the ‘Notification of errors in VAT returns’ form (VAT652). Instead, the method for making a correction now depends on both the value of the error and the circumstances that led to it. Different reporting routes apply, and selecting the correct one is important to remain compliant and avoid further scrutiny from HMRC.

Reporting errors to HMRC

Mistakes identified in VAT Returns covering the previous four years must be addressed in line with HMRC’s correction process. The method you use will depend on the size of the error and the circumstances in which it occurred.

Using VAT returns 

If the errors are relatively small, they can be corrected by adjusting your next VAT Return. This option is available when the net total of the errors is:

  • £10,000 or less, or;
  • Between £10,000 and £50,000, provided this figure does not exceed 1% of the total value of sales declared on the return.

This process allows you to amend your VAT position without the need for separate contact with HMRC, provided the error falls within the permitted thresholds.

Using the HMRC portal or by post

Larger or deliberate errors cannot be corrected through the return itself. In these cases, HMRC requires you to report the errors separately, either through their online portal or by submitting the correction in writing. This applies where:

  • The net value of the errors exceeds £50,000.
  • The net value of the errors is more than £10,000 and also greater than 1% of total sales.
  • The error was made deliberately.

When notifying HMRC, you must provide detailed information explaining the nature of the error, how it was identified, and why it occurred. This level of transparency helps HMRC assess the issue accurately and may reduce the risk of penalties or further investigation.

How do you work out the net value of errors?

The net value of errors must be calculated with precision, as it determines the correct method of reporting to HMRC. To establish this figure, first total the VAT that should have been paid but was not. From this amount, deduct any VAT that was overpaid or is otherwise repayable to you because of the same set of errors.

The outcome of this calculation is the net value. HMRC requires businesses to use this figure to decide whether corrections can be made through the next VAT Return or if they must be reported separately via the online portal or in writing. Accuracy in this process is critical, as misreporting can lead to penalties or repayment delays.

How The VAT People can help 

At The VAT People, we provide businesses with the expertise needed to manage VAT obligations confidently and correctly. Our team advises on how liabilities arise and what they mean for your business, giving you a clear understanding of your VAT position. We also explain the options available to you when errors or uncertainties arise, helping you make informed decisions about the best course of action.

Beyond advice, we carry out detailed reviews and audits of your VAT processes and records. This allows us to identify weaknesses, highlight opportunities for improvement, and ensure your systems are robust enough to withstand HMRC scrutiny.

We also provide hands-on support in preparing and submitting VAT Returns. By ensuring that returns are accurate, complete and fully compliant, we help businesses minimise the risk of penalties, disputes, or delays in reclaiming VAT. With our guidance, you can approach VAT reporting with greater confidence and assurance.

Call us today on 0161 477 6600 or fill out our online contact form and one of our VAT specialists will respond promptly.