SolvedCH81143 | Correction of errors for indirect taxes reasonable steps to notify - examples
From HM Revenue & Customs · Compliance Handbook
You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.
Example 1 - £6,000 inaccuracy automatically reversed
Despite taking reasonable care Sonya makes an inaccuracy of £6,000 in her 6/2015 VAT return. She discovers the inaccuracy and, realising that it will automatically be reversed in the next return, takes no further action.
Sonya is allowed to correct net errors of £6,000 by adjusting the next return and has therefore taken reasonable steps to inform HMRC. So, she does not incur a penalty for a careless inaccuracy in her 6/2015 return.
Example 2 - £120,000 inaccuracy notified to HMRC
Despite taking reasonable care Bernard makes an inaccuracy of £120,000 on his 9/2015 VAT return. When he identifies the inaccuracy, he immediately notifies us.
Because of the size of the inaccuracy Bernard was required to make a separate notification of the inaccuracy, which he did, and has therefore taken reasonable steps to inform HMRC. So, he does not incur a penalty for a careless inaccuracy in his 9/2015 return.
Example 3 - £120,000 inaccuracy automatically reversed but not notified to HMRC
Despite taking reasonable care Vijay makes an inaccuracy of £120,000 on his 3/2015 VAT return. He discovered the inaccuracy and, realising that it will automatically be reversed in a subsequent return, takes no further action.
Because of the size of the inaccuracy Vijay should have made a separate notification of the inaccuracy and has therefore not taken reasonable steps to inform HMRC. As he has not done this, we treat it as a careless inaccuracy in his 3/2015 return and an inaccuracy penalty is appropriate.