HMRC has now withdrawn the VAT652 form, which means companies that have made large errors in their VAT returns must follow updated processes to submit corrections.
Method 1 is required for smaller errors, while Method 2 is required for larger errors.
Here’s how to tell HMRC about an error on your VAT return from September 2025.
Method 1
The first method of correcting small errors on VAT returns simply lets taxpayers adjust their current tax return, which is allowed in the following scenarios:
The net error is less than £10,000(along with any previous errors in the last 4 years). For example, if you underpaid £11,000 on sales but underclaimed £2,000 on purchases, then the net error would be £9,000, so you could correct these errors using Method 1.
The net error is £10,000–£50,000 and less than 1% of the current return’s output. Meaning that for a £2.5 million output, you could correct a net error of up to £25,000 with Method 1.
Method 1 corrections will not receive late payment interest or penalties if the business has taken reasonable care to update their VAT return as soon as possible.
Method 2
Since the VAT652 form was withdrawn, any errors that are larger than the Method 1 allowances need to be corrected online (or otherwise by notifying HMRC in writing).
If your company needs to notify HMRC about a large VAT return error, you must include information about how it happened and when. Method 2 corrections will incur late payment interest charges.
Penalties for VAT return errors
If a business makes a VAT return error either deliberately or out of carelessness, then HMRC will apply VAT penalties for late payment. While you can still use Method 1 to correct careless errors, Method 2 must be used to correct deliberate errors.
To ensure you follow the right process, read HMRC’s guidance on how to amend VAT records.
If you find these processes confusing and want to make sure you avoid errors and penalties, you also have the option to consult financial experts like our accountants in Barnsley.
To enquire about help with VAT management, get in touch by calling 01226 298 298, or send an email to info@gbac.co.uk with your information and we’ll get back to you soon.