If you've made an error on a previously filed VAT return, you'll need to rectify it.
If the error is over £10,000, you can't correct it in the Business Toolkit. Instead, you'll need to complete the VAT652 form and send it directly to HMRC. You can find more information about how to correct errors on your VAT returns here.
If the error is less than £10,000, you can rectify the error on your next VAT return. You'll need to update the digital record (the incorrect transaction) so that it reflects the correct VAT. You can do this by selecting the relevant transaction in the Bookkeeping section of the Toolkit and making any necessary changes.
The Toolkit only pulls through transactions for the current VAT period, so the changes you make to the digital record will not be pulled into the current VAT return. Therefore, to include the error adjustment in your current VAT return, you’ll need to create two external transactions dated within the current VAT period. The VAT treatments on these external transactions will differ depending on whether you owe HMRC VAT or are claiming VAT.
For example, if you owe HMRC £200 in VAT because of an error, the two external transactions you would create are:
- An incoming transaction with category 'Other', Gross Amount = £1,200 (any amount greater than or equal to the VAT amount owed), custom VAT amount = £200
- An outgoing transaction with category 'Other', Gross Amount = £1,200 (the same as the incoming transaction). Set the VAT treatment for this external transaction to Exclude from VAT return
If the error means you need to claim VAT from HMRC, you can follow the steps above, but the outgoing transaction will need to include the custom VAT amount, and the incoming transaction will need to be set to Exclude from VAT Return.
You’ll have now created transactions that’ll feature on your VAT return to correct the VAT error, but will net off in your bookkeeping.