HMRC Updates
In an important update, HMRC have confirmed the removal of form VAT652 – previously used to correct errors on VAT returns. Going forward errors where reasonable care has been taken should be corrected on the next VAT return where the error is under £10k; or where more, it is 1% of Box 6 of the return up to be maximum of £50k.
If it is considered careless or deliberate, it is necessary to notify HMRC of the correction in writing, which can be done by way of post, email or through online portal. ‘Reasonable care’ disclosures can also be disclosed on a voluntary basis, or where the organisation isn’t sure if it would be classed as careless or not.
The benefit of disclosure is to crystallise an unprompted disclosure – i.e. telling HMRC before they find it. This will give maximum opportunity to suspend penalties.
At VITA our house style has always been to recommend sending the correction in letter format, as this gives the opportunity to add more detail about the error, the quantum, and the circumstances surrounding how the error occurred.
We recognise that many will use the form VAT652 by default, and these this change may have a greater impact. We are well placed in communicating with HMRC regarding errors and mitigating penalties and interest. We would be happy to support your business or clients where required.
In another update, HMRC has released new guidelines aimed at helping taxpayers understand the thought process that HMRC officers go through when considering compliance, to ensure that documents and returns submitted are correct and complete to the best of the business’ knowledge.
The guidelines are particularly relevant for individuals and businesses with complex tax affairs or those considering novel interpretations of tax law. HMRC stresses that most taxpayers with straightforward tax situations will not be affected. Helpful VAT related examples include:
Novel interpretation of the law
Improbable interpretation of the law
Example of legal proceeding
The guidance includes practical examples and outlines steps for resolving uncertainty, including seeking non-statutory clearance or professional advice. HMRC hopes the guidelines will help taxpayers “get their taxes right first time,” reducing the risk of compliance checks and penalties. Again VITA have a depth of knowledge and experience of these options and HMRC’s processes, and would be delighted to speak to you in the event this is of relevance.