HMRC updates VAT errror correction and late input tax guidance

published on 31 October 2025 | reading time approx. 2 minutes

HMRC has updated VAT Notice 700/45, changing how VAT-registered businesses must correct mistakes and claim input tax. The updated guidance clarifies how careless VAT errors and late input tax claims should be handled – even for smaller amounts – and reflects HMRC’s focus on ensuring that businesses take reasonable care when managing VAT compliance.

Careless VAT errors under £10,000

Under previous guidance, VAT errors under £10,000, could simply be corrected on the next VAT return. Now, HMRC expects careless errors – those caused by a lack of reasonable care – should be formally disclosed, regardless of the amount involved.

Examples of careless errors include:

Applying the incorrect VAT rate
Omitting a sales or purchase invoice
Failing to record a valid VAT invoice in the correct accounting period (now considered a careless error, rather than a simple timing issue)

These errors must be reported using HMRC’s online VAT Error Correction Service or by email/post. Simply adjusting your next return may lead to higher penalties if HMRC views the mistake as careless.

Late input tax claims

HMRC also clarified the treatment of late claims of input tax. Businesses have four years from the end of the VAT period in which the input tax became claimable. If the invoice was available at the time but didn’t claim it, HMRC is likely to treat this as a careless error rather than a valid late claim – in such cases, the correction should be made through the error correction process, rather than amending a later return.

Key takeaway

Even small VAT mistakes now require closer attention. If an invoice was available but not entered, or an error was caused by carelessness, the error should be reported through HMRC’s error correction process – not just corrected on your next VAT return. Businesses are encouraged to review their VAT processes and keep clear records to demonstrate reasonable care.