This paragraph examines the manner in which accounting errors in output tax (and indeed input tax) may be corrected and circumstances under which adjustments are not regarded as the correction of 'errors' in this context.
Correction of error not exceeding £50,000
Regulations1 made under VATA 1994, Sch 11, para 2(10)(b) provide that a taxable person may correct their VAT Account2 in relation to all understatements or overstatements of input tax or output tax discovered by them during a prescribed accounting period, provided that the difference between underdeclarations of liability and overdeclarations of liability does not exceed £50,000.
In this context and underdeclaration is the aggregate of (1) the amount (if any) by which credit for input tax was overstated in any return, and (2) the amount (if any) by which output tax was understated in any return3. Similarly, an overdeclaration is the aggregate of (1) the amount (if any) by which credit for input tax was understated in any return, and (2) the amount (if any) by which output tax was overstated
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