VATVAL02500 - Monetary consideration: examples of mistakes in charging VAT
Note: Actual VAT rates not used in these examples - figs. for illustration only.
Mistaken undercharge
Trader wants net receipt of £100
Trader charges £100 + £5 VAT
Trader’s VAT liability is 1/6 of (£100 + £5) = £17.50 (assuming VAT rate of 20%)
Mistaken overcharge
Trader wants net receipt of £100
Trader charges £130 (£100 + £30 VAT)
If VAT of £20 is not separately specified: VAT liability is 1/6 of £130 = £21.66 (assuming VAT rate of 20%)
If VAT of £30 is separately specified: VAT liability is £30
Failure to charge or recover VAT
Trader wants net receipt of £100
Trader fails to charge or charge made is disputed by the customer
VAT liability is 1/6 of £100 = £16.66 (assuming VAT rate of 20%)
Please see the guidance in VAT Assessment and Error Correction regarding the relevant powers of assessment.