VAT Form 652
Can we adjust an error through the VAT return?
Regulation 34 SI 1995/2518 allows a trader to adjust an error through their VAT return providing the error does not exceed the greater of
1% of net turnover
The maximum error that can be adjusted in this way is £50,000.
It should be noted that adjusting errors in this way is not regarded as unprompted disclosure for penalty purposes. HMRC have the right to charge a penalty on a corrected error so it is always advisable to inform HMRC of any sizeable error corrections via the VAT return. Form 652 should be used to make the disclosure - and put "yes" in the box which states "Adjusted on VAT return".
Deliberate under or overpayments of VAT on past returns cannot be treated as errors and corrected on a future VAT return even if the amounts involved are less than the above error notification limits. It is only errors that are discovered after the returns have been submitted that can be adjusted on a future return. A deliberate under or overpayment cannot be discovered at a future date if the taxpayer had knowledge of it when he submitted his original return. The only route to notify HMRC of the deliberate actions on previous returns is by submitting form VAT 652.