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The Value Added Tax Regulations 1995

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Correction of errorsU.K.

34.  —

(1) [F1Subject to paragraph (1A) below,] this regulation applies where a taxable person has made a return, or returns, to the Controller which overstated or understated his liability to VAT or his entitlement to a payment under section 25(3) of the Act.

[F2(1A) Subject to paragraph (1B) [F3and (1C)] below, any overstatement or understatement in a return where—

(a)a period of [F44 years] has elapsed since the end of the prescribed accounting period for which the return was made; and

(b)the taxable person has not (in relation to that overstatement or understatement) corrected his VAT account in accordance with this regulation before the end of the prescribed accounting period during which that period of [F54 years] has elapsed,

shall be disregarded for the purposes of this regulation; and in paragraphs (2) to (6) of this regulation “overstatement”, “understatement” and related expressions shall be construed accordingly.

(1B) Paragraph (1A) above does not apply where—

(a)the overstatement or understatement is discovered in a prescribed accounting period which begins before 1st May 1997; and

(b)the return for that prescribed accounting period has not been made, and was not required to have been made, before that date.]

[F6(1C) Where paragraph (1B) above does not apply, any overstatement or understatement in a return shall be disregarded for the purposes of this regulation where the prescribed accounting period for which the return was made or required to be made ended on or before 31st March 2006.]

(2) In this regulation—

(a)“under-declarations of liability” means the aggregate of—

(i)the amount (if any) by which credit for input tax was overstated in any return, and

(ii)the amount (if any) by which output tax was understated in any return;

(b)“over-declarations of liability” means the aggregate of—

(i)the amount (if any) by which credit for input tax was understated in any return, and

(ii)the amount (if any) by which output tax was overstated in any return.

(3) Where, in relation to all such overstatements or understatements discovered by the taxable person during a prescribed accounting period, the difference between—

(a)under-declarations of liability, and

(b)over-declarations of liability,

does not exceed [F7£50,000,] the taxable person may correct his VAT account in accordance with this regulation.

[F8But if Box 6 of the taxable person’s return for the prescribed accounting period must contain a total less than £5,000,000, the difference must not for these purposes exceed 1% of that total [F9unless the difference is £10,000 or less].

(Box 6 must contain the total value of sales and all other outputs excluding any VAT[F10see regulations 25 and 25A and the relevant forms specified in a notice published by the Commissioners].)]

(4) In the VAT payable portion—

(a)where the amount of any overstatements of output tax is greater than the amount of any understatements of output tax a negative entry shall be made for the amount of the excess; or

(b)where the amount of any understatements of output tax is greater than the amount of any overstatements of output tax a positive entry shall be made for the amount of the excess.

(5) In the VAT allowable portion—

(a)where the amount of any overstatements of credit for input tax is greater than the amount of any understatements of credit for input tax a negative entry shall be made for the amount of the excess; or

(b)where the amount of any understatements of credit for input tax is greater than the amount of any overstatements of credit for input tax a positive entry shall be made for the amount of the excess.

(6) Every entry required by this regulation shall—

(a)be made in that part of the VAT account which relates to the prescribed accounting period in which the overstatements or understatements in any earlier returns were discovered,

(b)make reference to the returns to which it applies, and

(c)make reference to any documentation relating to the overstatements or understatements.

(7) Where the conditions referred to in paragraph (3) above do not apply, the VAT account may not be corrected by virtue of this regulation.

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