Helping you prosper
VAT accounting errors can and do commonly arise, for a variety of reasons. For example, due to one off oversight, processing mistakes, lack of staff training or misunderstanding of VAT rules. Errors can be careless, deliberate or non-careless (if those errors arose despite reasonable care being taken).
However, regardless of the reason, all VAT errors need to be properly and promptly corrected in accordance with the normal rules and time limits.
How can I disclose a VAT error?
In 2025, HMRC removed the option for VAT errors to be disclosed using VAT Form 652. Instead, VAT errors must instead be corrected through the business’s online Government Gateway HMRC account or by submitting a written error correction letter to HMRC. Agents can also similarly submit online VAT error corrections to HMRC on clients’ behalf, subject to the normal 64-8 and other requirements.
Careless errors and deliberate inaccuracies
Although careless net VAT errors (and errors made despite taking reasonable care) valued below £10,000 (or below £50,000 in value and less than 1% of total sales) can be corrected by adjustment to the VAT return in which the error is found, HMRC’s guidance outlines the importance of also separately disclosing all careless errors to HMRC, irrespective of their size or value. This is because correcting an error within a VAT return will not serve as notifying HMRC for the purpose of mitigating penalties for such careless errors. Deliberate errors/inaccuracies are treated differently so cannot be adjusted by way of VAT returns and must be fully disclosed to HMRC.
Without written disclosure, if a careless error is considered ‘prompted’ as a result of an HMRC visit or enquiry, associated penalties of between 15 and 30% of the VAT amount due could arise. But, if the VAT error is corrected within the VAT return and the careless error is also separately disclosed to HMRC in writing, this would instead be considered an ‘unprompted’ disclosure of such error, and penalties are likely to be reduced. Civil monetary penalties are typically levied for deliberate inaccuracies, and HMRC operate a criminal investigation policy for the most serious deliberate cases.
There can be a fine dividing line between what is considered a careless, non-careless or deliberate error (especially if regular errors are made) and supporting the position to HMRC can be difficult and burdensome. HMRC are highly likely to query the VAT error position during any VAT review and the reason for any such VAT errors having arisen. Given that HMRC may seek to raise penalties and/or interest where any careless and/or deliberate errors have not been properly and formally notified to HMRC, it is important to ensure you are fully compliant with HMRC’s notification requirements and that your records are accurate and complete. Such penalties can be significant, so can result in unwanted financial as well as wider commercial and/or reputational impact.
Formal notification requirements
Remember that any VAT errors exceeding the normal error correction thresholds or which cannot be adjusted through the VAT return must still be corrected by way of formal written error correction notification to HMRC’s VAT error correction team, as detailed in paragraph 4.6 of HMRC’s Notice 700/45.
The next step
You should ensure that you are familiar with HMRC’s guidance when managing your VAT position and minimising the financial impact of any VAT errors. If you would like further guidance or would like to discuss in relation to your business, please contact Lisa Burnside or your usual UHY VAT adviser.
