VAT Error Disclosure under £10,000 – Draft Letter To HMRC

By   12 February 2018

Error Correction – belt and braces

If an error is discovered on a past VAT return it is only usually necessary to report it to HMRC (on form VAT652) if it is £10,000 (net of all errors) or more of VAT.

However, because of the current penalty regime it is important to ensure that any adjustment qualifies as an unprompted disclosure. Consequently, we recommend that a letter similar to that below is sent to HMRC in cases where errors below £10,000 have been adjusted on a current return.

“RE: Letter of disclosure; error on return for period XXXX

 We disclose, (on behalf of our above named client), that the VAT return for the period XX/XX contained an inaccuracy.

 Reason, eg; Due to a processing error, three sales invoicing totalling……

 This resulted in the net VAT due for the period being understated by £XX

 As the error is within the limits for correction on the next VAT return, this error has been corrected on the return for the period in which the error was discovered, namely the period XX/XX.  No further action to correct the error is therefore necessary.

 Please treat this letter as an unprompted disclosure of an inaccuracy.  Alternatively, please advise me of any further details that you may require in order that that this letter may be treated as such.”

It is accepted that this course of action may prompt enquiries, but it is our view that that is preferable to having a potential ticking time bomb.

Please contact us should you have any queries on error disclosure.