How to Correct Errors in a Submitted VAT Return

Submitting a VAT return accurately is crucial for every VAT-registered business in the UK. Mistakes can happen, whether due to human error, incorrect invoicing, or system miscalculations. Fortunately, HMRC provides a process to correct VAT return errors. This article provides an in-depth guide on how to correct errors in your submitted VAT return while ensuring compliance and avoiding penalties.

The Importance of Accuracy in VAT Returns

Filing an accurate VAT return is a legal obligation. Any discrepancies can result in:

Overpayment or underpayment of VAT
Incorrect claims for VAT refunds
Financial penalties or interest charges from HMRC
Increased likelihood of audits or investigations

Therefore, it is essential to identify and correct VAT return errors immediately. The sooner you fix them, the better your chances of avoiding punitive actions.

Types of VAT Return Errors

Understanding the kinds of mistakes that can occur will help you spot and correct VAT return errors. Common types include:

Misreporting total sales or purchases
Claiming VAT on non-eligible expenses
Entering the wrong VAT rate
Duplicating invoices
Omitting important transactions
Typographical errors in data entry

Each of these issues can distort your VAT liability and lead to complications with HMRC.

How HMRC Classifies Errors

HMRC typically assesses VAT return errors in three categories:

Careless Errors – Accidental mistakes due to a lack of attention. Penalties may apply but can be reduced.
Deliberate Errors – Intentional misreporting. Hefty penalties apply.
Deliberate and Concealed Errors – Intentional errors that are also hidden from HMRC. These attract the highest penalties.

The way you correct VAT return errors and the speed with which you take action can influence the level of penalty, if any.

When Can You Correct Errors on Your Own?

HMRC permits businesses to correct VAT return errors themselves if the net value of the error is £10,000 or less, or up to £50,000 if it is not more than 1% of the Box 6 figure (total sales) for the return in which the error is discovered.

✅ You can adjust in your next VAT return if:

The total net error is within the HMRC thresholds.
The error was not deliberate.
You discovered the mistake within the last four years.

❌ You must notify HMRC using form VAT652 if:

The net value of the error is above the threshold.
The error is deliberate or fraudulent.

Steps to Correct VAT Return Errors (Below Threshold)

If the mistake is within the acceptable limit and not deliberate, follow these steps to correct VAT return errors:

1. Identify the Error

Review the incorrect return and pinpoint exactly what went wrong—wrong invoice value, duplicated entry, or missing purchase?

2. Calculate the Net Value

Determine whether the error led to underpaid or overpaid VAT. Work out the net value of the error to decide whether it can be adjusted.

3. Include in the Next VAT Return

Make the necessary correction in the next VAT return:

Box 1: VAT due on sales
Box 4: VAT reclaimable on purchases
Box 6/7: Adjust your sales/purchases figures accordingly

This will allow HMRC to receive the corrected VAT figure automatically.

4. Document the Correction

Keep full records explaining:

The nature of the error
The amount of the adjustment
The affected periods

You may need this documentation if HMRC audits your business later.

Steps to Correct VAT Return Errors (Above Threshold)

For larger or serious errors, you must report them to HMRC via VAT652.

1. Download VAT652 Form

You can find it on HMRC’s website. The form asks for:

Your VAT registration number
Error details
A breakdown of how and when the error occurred

2. Provide Supporting Documents

You may be asked to attach:

Corrected invoices
VAT calculations
Sales ledgers or purchase records

3. Submit to HMRC

Send the completed VAT652 form online or via post to the specified address. If you submit online, retain the reference number and a copy of your form.

4. Wait for Confirmation

HMRC may accept the correction or get in touch for more information. They may also calculate penalties based on the nature of the error. Correct VAT return errors honestly and in full to reduce your chances of penalties.

Penalties for Not Correcting VAT Errors

If HMRC discovers the error before you report it, you may face the following:

Type of Error	Penalty Range
Careless	0% – 30%
Deliberate	20% – 70%
Deliberate and Concealed	30% – 100%

Voluntary disclosure and correction reduce these penalties substantially. In many cases, reporting an error before HMRC notices it can lead to no penalty at all.

Record-Keeping Requirements

Whether you self-correct or submit a VAT652 form, you must keep:

A detailed explanation of the error
Copies of the incorrect and corrected entries
Any correspondence with HMRC

Maintain these records for at least 6 years, as HMRC can review previous filings at any time.

Tips to Avoid VAT Return Errors in the Future

Here are some best practices to reduce the risk of future errors:

1. Use Accounting Software

Modern software (like Xero, QuickBooks, or Sage) helps automate calculations and VAT categorization.

2. Cross-Check Before Submission

Review all entries before filing. Match them against your bank statements and sales/purchase records.

3. Update VAT Knowledge

Rules change. Stay informed about VAT thresholds, rates, and deadlines to ensure accurate returns.

4. Outsource to Professionals

Hiring an accountant can help you file accurately and correct VAT return errors quickly if they arise.

5. Internal VAT Reviews

Conduct periodic reviews or audits to ensure your VAT accounting remains compliant and up-to-date.

How Accountants Help Correct VAT Return Errors

If you’re unsure how to fix a mistake, a VAT return accountant can:

Identify and correct VAT return errors
File VAT652 forms professionally
Liaise with HMRC on your behalf
Help reduce or avoid penalties
Improve your internal VAT processes

This ensures peace of mind and compliance, especially for growing businesses with complex transactions.

Conclusion

Mistakes in VAT returns are common but fixable. Whether the issue is minor or significant, it’s your responsibility to correct VAT return errors quickly and accurately. Understanding the thresholds, procedures, and consequences ensures that your business remains compliant and avoids unnecessary penalties. If you’re ever in doubt, seek advice from a VAT return accountant. A timely correction today can save your business from major issues tomorrow.

FAQs

Yes, but you can't edit the original return. You either adjust your next return (if eligible) or submit a VAT652 form to HMRC.

You can correct VAT return errors up to 4 years from the date of the original return.

VAT652 is the official form used to inform HMRC of significant or deliberate VAT errors.

If the mistake was genuine and you correct it voluntarily, HMRC may reduce or waive the penalty entirely.

Yes, as long as it's within the 4-year time limit and the amount falls within the allowable thresholds.