HMRC increases VAT error correction limit

HM Revenue & Customs (HMRC) is reportedly planning to let businesses correct errors of up to £10,000 on their VAT returns.

From July 1st, HMRC has increased the £2,000 limit that was in place for small businesses that make mistakes on their VAT returns to £10,000.

Website Accounting Web reported that this means that sole traders who spot an error of up to £10,000 on their previous VAT return can simply amend it on the next return, rather than have to make a separate report to HMRC.

However, accountant Niki Ross Martin explained to the site that the new limit would not qualify as disclosure for the purposes of the penalty regime.

"When an error is corrected on a VAT return there is no requirement to notify HMRC," she said.

"So a 'voluntary disclosure' of a VAT error, will not meet the definition of a disclosure for new penalty purposes, and thus will not protect the trader in the event of a penalty being due."