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Newsletter Issue - September 2009
Where you find an error in your VAT records, which has already been included in the figures reported on a VAT return, don't panic. You can correct that error on your next VAT return, as long as the net error amounts to VAT due of less than £10,000, or less than 1% of your quarterly turnover (subject to a £50,000 cap). If the net error is larger than this you need to write to the Tax Office setting out what went wrong and how you have corrected the problem. We can help you with this.
Correction on the VAT return is the best and quickest option for most small errors. If the Tax Inspector looks in detail at your VAT return you may have to pay interest on the delayed VAT payment and a small penalty.
However, the interest rate currently used by HMRC is only 2.5%, due to rise to 3% in September. The penalty for an error that has been correctly voluntarily is a maximum of 30% of a nominal interest figure set at 5% of the delayed VAT payment.
For example: If you correct an error of VAT underpaid of £9000 after six months, the maximum penalty will be £67.50: £9,000 x 5% x 30% x 6/12 = £67.50.
