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HMRC are considering a change in the regulations governing mistakes made when businesses account for and pay over their VAT.

Currently, where a trader makes a net error of less than £2,000 on a VAT return, he can correct the mistake on the following return. If, however, the error involves a sum of more than £2,000, the trader must report the discrepancy to the tax authorities.

Larger firms have complained that the current threshold for reporting errors is too low and adds unnecessarily to the burden of administering VAT.

On average, HMRC receives 45,000 voluntary disclosures each year where businesses have made miscalculations on their VAT returns.

Following discussions with accountants and the Administrative Burdens Advisory Board, HMRC have agreed that the present threshold can cause additional work and a consultation has therefore been launched to examine how the rules may be amended.

A number of changes are being considered, including:

• an increase in the error reporting threshold;
• the introduction of a series of different thresholds according to the size of business; and
• abolishing the threshold altogether and permitting businesses to correct all errors on their next VAT returns.

The consultation runs until 31 October.

Link

Review of voluntary disclosure of errors on indirect tax returns