If your business has made VAT errors, proactively informing HMRC can significantly reduce penalties. HMRC categorises errors as genuine mistakes (no penalty), careless errors (penalties up to 30%, often suspensible), or deliberate errors (penalties up to 100%, requiring separate disclosure).

Key Points:

• Small errors (under £10,000) can be corrected on the next VAT return.
• Larger errors (£10,000–£50,000) depend on their size relative to total outputs and may need formal disclosure via Form VAT 652.
• Deliberate errors must always be disclosed separately.
• Full, honest disclosure with explanations helps reduce penalties.
• Cooperate with HMRC and provide records promptly to improve outcomes.

Takeaway: Assess your error, calculate the net amount, and disclose promptly and fully to minimise penalties.

For further information or to discuss your specific circumstances in detail, please contact a member of our VAT team on 01227 277667 or via email at vat@mphaccountants.co.uk.