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How to Correct VAT Errors with HMRC

Find out how to correct VAT errors, depending on how big the mistake is and if you need to contact the VAT correction team at HMRC.

1. HMRC VAT Error Reporting Threshold

Correcting VAT errors are handled differently depending on whether the mistake exceeds the threshold set by HMRC. The VAT correction limit is:

  • a net value of £10,000 (ie: the difference between what you owe HMRC and they owe you in respect of the error);
  • 1% of your box 6 figure (up to a maximum of £50,000).

You must report VAT errors that exceed these limits separately to HMRC. You cannot claim these back on your VAT returns.

2. Correcting VAT Errors of Less than £10,000

HMRC lets you go back 4 years from the accounting period where the error happened to reclaim any VAT that was missed in previous VAT returns provided the total is less than the error reporting threshold above and claim this on your next VAT return.

If you are using a bookkeeping software like Xero, then you’ll most likely need to make an adjustment to reclaim missed VAT in box 4 (input VAT) or box 1 (output VAT), depending on the nature of the error.

Even though there is no need to tell HMRC, you should keep detailed workings to present to HMRC in the event they carry out a VAT inspection.

*** the £10,000 limit is defined by HMRC as a net value of £10,000 (ie: the difference between what you owe HMRC and they owe you in respect of the error).

3. Correcting VAT Errors of More Than £10,000 (VAT Form 652)

Where the missed VAT on previous returns exceeds the error reporting threshold, then a special disclosure needs to be made to HMRC using a VAT652 form. You’ll need to include details about your business on the form along with details of what the corrected amount should be, box by box. If the mistake spans more than one quarter, multiple sections will need to be filled in.

Always keep full records of your backdated VAT claim including copies of invoices and details how you made your claim.

Once completed, you’ll need to print and post the form to HMRC VAT Correction Team at:

HM Revenue and Customs 
VAT Error Correction Team – SO864 
NE98 1ZZ