HMRC has recently updated the process for correcting VAT return errors, offering a clearer pathway for businesses to stay compliant. For many business owners, especially those navigating VAT submissions without in-house finance teams, even a small mistake can cause unnecessary stress. Understanding how to correct an error promptly is key to avoiding penalties and maintaining good standing with HMRC.
What Has Changed?
In the past, businesses were directed to submit a VAT652 form by email or post to notify HMRC of return errors. This approach is being replaced. Now, if your business needs to correct an error that exceeds the threshold for including in your next VAT return, you must use the new digital disclosure service instead.
The new service applies specifically to errors above the £10,000 threshold (or 1% of your box 6 figure, capped at £50,000). These cannot be corrected in your next return and must be reported through the appropriate method online.
This update reflects HMRC’s broader digitalisation goals and its effort to simplify tax administration. It also aligns with other tools like HMRC’s VAT registration estimator, which is part of its push towards more online compliance.
Two Ways to Fix VAT Return Errors
There are now two distinct methods for correcting VAT return errors:
- Method 1: Adjust the error on your next VAT return if it is below the £10,000 threshold (or 1% of your box 6 turnover, if higher, up to £50,000).
- Method 2: For errors above this threshold, use HMRC’s new digital disclosure service.
This applies to errors made in the last four years. HMRC guidance makes it clear that accuracy matters, and delays in correcting can increase your exposure to penalties.
Why This Matters to Business Owners
Correcting VAT return errors quickly can significantly reduce penalties. If you find an issue and disclose it before HMRC contacts you, the terms are often more favourable.
The updated digital service also allows HMRC to respond more efficiently, meaning businesses get clarity sooner and can avoid ongoing uncertainty.
Inaccurate VAT returns are one of the most common triggers for HMRC enquiries. So, if your business discovers an issue, don’t wait. Seek advice and make the correction using the correct method.
Final Thoughts
These changes to the process for correcting VAT return errors reflect a wider modernisation of the UK’s tax system. With more digital tools and tighter compliance expectations, staying informed is more important than ever.
If you’re reviewing past VAT returns or considering whether to correct an error, it’s worth getting independent advice. Understanding your options and timing can make a real difference in how HMRC responds.