VAT error correction explained

If your business accidentally submits an incorrect VAT return, it’s important to correct it as soon as possible. If you don’t, and HMRC finds underdeclared VAT, you may face a penalty and possibly a tax investigation. To help you avoid this, we look closely at VAT error correction and how you can report it.

Methods of VAT error correction

There are currently two main methods of VAT error correction.

The method you choose depends on the value of the error.

Method 1 is to correct the error on your next VAT return. You are allowed to do this if:

• The net value of the error is not more than £10,000
• The net value of the error is between £10,000 and £50,000, but does not exceed 1% of total sales for the correction period.

While this process is relatively simple, you should note that if HMRC deems the error to be careless, you could still face penalties. To try and reduce potential penalties in such a case, you need to formally notify HMRC of the error. You can do this by letter or by completing an error correction notification.

Method 2 of VAT error correction is to notify HMRC directly of the mistake. You must do this if:

• The error is between £10,000 and £50,000 and does exceed 1% of sales for the correction period
• The net value of the error(s) is over £50,000
• You made the errors deliberately.

You can also use Method 2 if you owe less, rather than doing the VAT error correction on your next return.

How to notify HMRC

Until mid-2025, you could notify HMRC of VAT errors using form VAT652. This has now been withdrawn.

However, since July 2025, you (or your agent) can submit corrections via an online form. You’ll need to log in to your Government Gateway account and visit this page, which will also confirm how you need to submit the correction.

If your business is one of the very few exempt from Making Tax Digital for VAT, then you can notify HMRC about a VAT error correction in writing. You will need to include your VAT number, along with the following details:

• How each mistake arose
• The VAT accounting period it took place in
• Whether the error concerned input tax or output tax
• The underdeclared or overdeclared VAT in each VAT period
• How you have worked out this figure
• Whether errors meant you paid HMRC an amount that wasn’t due
• The total amount to be adjusted.

It’s particularly important to include all this information if you are making a refund claim. HMRC won’t accept it unless you do.

You should send your VAT error correction to:

BT VAT
HMRC
BX9 1WR

Time limits for VAT error correction

The time limit for VAT error correction is four years from:

• The end of the accounting period in which an error occurred for underdeclared and overdeclared output tax, or overclaimed input tax
• The due date of the return for the accounting period in which an underclaimed input tax error occurred.

The four-year time limit doesn’t apply to deliberate errors.

What to do next

If you have made a VAT error, or you’re not confident about the VAT error correction process, talk to your accountant. If you are a THP client, we’ll happily review your records, calculate any adjustments and liaise with HMRC on your behalf. Get in touch today to talk to a member of our friendly team.