Correcting VAT return error

[Contreras]

I have discovered an error in my VAT return submitted (and paid) for the period just gone. Payment isn't actually due until next month.

Unfortunately I neglected to account for invoices with VAT content totalling about £1700, but there is also some bad debt to be claimed on an old invoice with VAT content about £200, so overall MyCo has benefited from £1500 VAT underpayment.

My understanding is that due to the amount involved it can be corrected on the next period VAT return without needing to inform HMRC of the error. Basically it's legal to fly this one in under the radar.

However I feel uncomfortable about the potential for a later VAT inspection to claim MyCo benefited through some 'careless' bookkeeping. So my question is, can I (should I) make a further payment on account to HMRC for the ~£1500 now before the due deadline?

This being on the basis that even though the error might be due to carelessness on my part, there is no financial benefit and therefore no penalty or interest due. On the other hand I am wondering since it would look like an overpayment whether this itself will flag up on HMRC's radar for a closer inspection?

[Greg@CapitalCity]

My suggestion would be to clean the underpayment up with the next VAT return, and don't make a payment on account (doing so would just confuse the HMRC in my opinion).

[Nixon Williams]

I have discovered an error in my VAT return submitted (and paid) for the period just gone. Payment isn't actually due until next month.

Unfortunately I neglected to account for invoices with VAT content totalling about £1700, but there is also some bad debt to be claimed on an old invoice with VAT content about £200, so overall MyCo has benefited from £1500 VAT underpayment.

My understanding is that due to the amount involved it can be corrected on the next period VAT return without needing to inform HMRC of the error. Basically it's legal to fly this one in under the radar.

However I feel uncomfortable about the potential for a later VAT inspection to claim MyCo benefited through some 'careless' bookkeeping. So my question is, can I (should I) make a further payment on account to HMRC for the ~£1500 now before the due deadline?

This being on the basis that even though the error might be due to carelessness on my part, there is no financial benefit and therefore no penalty or interest due. On the other hand I am wondering since it would look like an overpayment whether this itself will flag up on HMRC's radar for a closer inspection?

Based on what you have advised, you can simply correct this on the next VAT return.

Alan

[Sally@InTouch]

My suggestion would be to clean the underpayment up with the next VAT return, and don't make a payment on account (doing so would just confuse the HMRC in my opinion).

I'll second Greg

[Sockpuppet]

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.

HMRC also suggest if its a small error you correct in your next return.

[Contreras]

Thanks all. I'll just correct it with the next return then.

What got me wondering was was the bit about penalties and interest due even for errors that don't need reporting. A unanimous vote from the CUK board is enough for me though. Ta.

[Wanderer]

Official advice from HMRC is here

Pretty much correct it on the next return if it's less than the limit