I’ve seen plenty of panicked messages from business owners who spot a VAT mistake after submitting a return — and before you stress, most errors can be corrected without triggering heavy penalties if you act promptly and sensibly. Below I’ll walk you through how I approach VAT return errors for clients: how to assess the problem, when to amend a return, when to notify HMRC separately, and practical bookkeeping steps to fix things cleanly.
Step 1 — take a breath and quantify the error
The first thing I do is stop the adrenaline and get the facts. Panic makes mistakes worse. Open the VAT return and your bookkeeping for the period in question and answer three simple questions:
Record the calculations in a short spreadsheet or a note in your accounting system. Make sure you include the net value, the VAT amount and a reference to the supplier or customer invoice. Clear documentation is the best defence if HMRC asks questions later.
Step 2 — decide whether to correct on the next return or notify HMRC
HMRC allows businesses to correct many mistakes on the next VAT return instead of making a formal disclosure. The sensible route depends on materiality and the pattern of errors.
I always advise clients to err on the side of disclosure if they’re unsure. Proactive disclosure usually leads to lower penalties than waiting for HMRC to find the problem.
Step 3 — how to correct in your bookkeeping
Fixing the VAT in your accounts must be straightforward and traceable. Here’s a typical workflow I use:
Most cloud accounting packages (Xero, QuickBooks, Sage) let you either amend the original transaction (if within the software’s retention rules) or create an adjusting journal and tag it to the correct VAT period. I prefer tagging adjustments clearly so a future reviewer can see why the change was made.
Step 4 — making the amendment on your VAT return
If you can still amend the original VAT return online via the HMRC service for that period, do so — but be careful to follow HMRC’s on‑screen prompts. If the return cannot be edited, you can usually correct the error on the next return by adding the adjustment to the appropriate box, with a note in your VAT records explaining the reason.
When amending on the next return, make sure the adjustment is labelled in your internal records (not on the VAT return itself) with:
Step 5 — voluntary disclosure: how and why
If you decide — or realise you must — formally notify HMRC, do it promptly. Voluntary disclosure reduces the likelihood of penalties because you’re showing you found and reported the mistake yourself.
In my experience, a timely, clear disclosure with good supporting records often leads to a modest penalty or no penalty at all. HMRC is usually fair when taxpayers act in good faith.
Step 6 — expect interest and possible penalties, but manage them
It’s realistic to expect that HMRC may charge interest on any unpaid VAT from the date it should have been paid. Penalties depend on whether HMRC considers the error careless, deliberate, or deliberate with concealment. However, penalties are generally reduced when a disclosure is prompt and fully cooperative.
If you’re nervous about the amounts or your case complexity, get professional help. I frequently work with clients to prepare the disclosure so the narrative and calculations are clear and defensible.
Practical checklist I use with clients
| Action | Why it matters |
| Quantify the error (net & VAT) | Establish materiality and required correction route |
| Document the cause | Shows HMRC you understand and have fixed root cause |
| Correct bookkeeping entries | Maintains audit trail and ensures ledgers reflect reality |
| Amend return if possible or adjust next return | Keeps VAT accounting aligned with HMRC requirements |
| Voluntary disclosure if required | Reduces penalty risk and shows good faith |
| Keep all supporting documents | Essential if HMRC queries the correction later |
Tools and tips that make this easier
I rely on a few practical tools and habits that save time and reduce risk:
If you’d like, I can walk through a specific example with your numbers or review your proposed disclosure before you submit it to HMRC. Fixing mistakes promptly and with a clear paper trail is the best route to avoid heavy penalties — and it’s much less painful than letting small errors compound into bigger problems.
