Tax Tip

HM Revenue & Customs has announced plans to let businesses correct their own errors of up to £10,000 on their VAT returns.

For the new VAT period, starting July 1 2008, the tax authority will raise the current £2,000 limit below which traders can currently amend their VAT mistakes by £8,000.

This means that if taxpayers discover an error of up to £10,000 on their previous VAT return, they can amend it on the next return, rather than make a separate disclosure to HMRC.

Also if turnover exceeds £1m then, under the changes, the limit is 1% of turnover up to a maximum of £50,000, with errors in excess of the new limits to be disclosed to HMRC as before.

HMRC are now to call it the ‘Error Correction Procedure.’