making-a-correction

---
name: making-a-correction
description: Turns the VAT errors you have found across your past returns into a written correction position, one row per error: which route under VAT Notice 700/45 it takes, the exact GBP 10,000 and 1% of box 6 thresholds worked for that period, the four year time limit deadline, a penalty points tracker matched to your filing frequency, the late payment penalty and interest exposure if tax is still owed, and a disclosure register recording the Schedule 24 penalty percentage range that your accountant's own careless, deliberate or genuine mistake finding puts you in, plus a gaps list. Use when you find a mistake on a past VAT return, a bookkeeper flags that a figure has not reconciled, or you are deciding whether to correct it yourself or notify HMRC separately.
---

# Every VAT error you have found, routed to the right HMRC process, dated against its deadline, and priced against the penalty it heads off

You give this every error you or your bookkeeper has found across past VAT returns, the net value and the accounting period each one belongs to, the box 6 figure for the return period in which you discovered it, whether any of the tax is still unpaid, your filing frequency, and your accountant's own view on whether each error is careless, deliberate or a genuine mistake. You get back a written register that sorts every error into the correction method the notice actually requires, works the exact GBP 10,000 and 1% of box 6 thresholds against your own numbers, calculates the four year deadline, tracks where you sit against the penalty points threshold for your filing frequency, and prices the late payment penalty and interest if anything is still owed. It will not decide whether an error was careless, deliberate or an honest mistake. That question changes the penalty percentage by tens of points either way, no document can answer it from the numbers alone, and it is your accountant's judgement to make, not this skill's.

## What it does

1. **Enumerate every error from the working papers, not from memory.** List every mistake found on a past VAT return: the accounting period it belongs to, the box or boxes affected, the net value in pounds, whether it under-declared output tax, over-declared output tax, under-claimed input tax or over-claimed input tax, and the document that surfaced it, a reconciliation, a supplier statement, an accountant's review, a HMRC letter. Do this before any threshold is applied, because a correction exercise that starts from the return you are about to file simply misses whatever nobody has gone looking for yet. The count you finish with is the population every later step must account for.

2. **Work the adjustment threshold in VAT Notice 700/45 against your own box 6 figure, error by error.** The notice sets two methods. Method 1 applies where "the net value of errors found on previous returns is between £10,000 and £50,000 and exceeds 1% of the box 6 (net outputs) VAT Return declaration due for the current return period during which you discovered the error" does not hold, that is, errors with a net value that "do not exceed £10,000", or that fall "between £10,000 and £50,000" but stay within that 1% of box 6 limit, can simply be adjusted on the next return. Method 2, which requires you to "notify HMRC separately of the error", is compulsory where the net value is "between £10,000 and £50,000 and exceeds 1% of the box 6 (net outputs) VAT Return declaration due for the current return period during which you discovered the error", where the net value is "greater than £50,000", or where "you made the errors on previous returns deliberately". Take the box 6 figure from the return period you are discovering the error in, not the period the error happened in, calculate 1% of it, and record the working, not just the answer.

3. **Notify separately using HMRC's current route, and record it as a route, not a form number.** VAT Notice 700/45 does not name a paper VAT652 form on its current page: it states plainly, "You can report errors to HMRC online." Build the notification pack from what the online service asks for regardless: the return period the error relates to, the box or boxes affected, the net value, how the error arose, and the corrected figures. If your own accountant's practice still refers to this as "a VAT652", treat that as their shorthand for the same online notification, not a separate paper route, and check with them before assuming a form still exists.

4. **Calculate the four year deadline for every error, and mark deliberate errors as outside it rather than guessing a replacement date.** The notice states, "The time limit for error corrections is 4 years from the end of the prescribed accounting period" for under-declared and over-declared output tax and over-claimed input tax, and from "the due date of the return" for under-claimed input tax. It then states separately that "the 4-year time limit does not apply to deliberate errors", without stating what limit, if any, replaces it on that page. Calculate the four year date for every error using the correct start point for its category. For any error your accountant has marked deliberate, write the field as "no four year limit stated by this notice, ask the accountant" rather than inventing six years or any other figure, because that number was not found on the primary source and a wrong deadline is worse than an open one.

5. **Never decide careless, deliberate or genuine mistake. Record only what your accountant has already decided, against HMRC's own definitions.** HMRC's compliance factsheet CC/FS7a defines the three categories in plain terms: careless "is where you failed to take reasonable care to get things right", deliberate "is where you knew that a return or document was inaccurate when you sent it to us", and deliberate and concealed "is where you knew that a return or document was inaccurate and you took active steps to hide the inaccuracy from us, either before or after you sent it to us." This skill records whichever of those three your accountant has assigned to each error, and if none has been assigned yet, the field reads "not yet decided by adviser" and the error goes into the gaps list. It never infers the category from the size of the error, how it arose, or anything else.

6. **Record the penalty percentage range that category and disclosure choice puts you in, as a range, never a single figure.** The same factsheet sets the ranges, and the swing between unprompted and prompted disclosure is the reason to correct early. Careless runs from 0% to 30% unprompted and 15% to 30% prompted. Deliberate runs from 20% to 70% unprompted and 35% to 70% prompted. Deliberate and concealed runs from 30% to 100% unprompted and 50% to 100% prompted. Record both the category and the disclosure type your accountant expects, unprompted meaning you told HMRC before they had any reason to suspect an inaccuracy, prompted meaning they had already given you reason to believe they were about to find it. Never collapse the range to one number, and never pick the disclosure type yourself: it depends on facts, such as whether a compliance check was already open, that only the owner and the accountant know.

7. **Build the penalty points tracker against your actual filing frequency, including nil and repayment returns.** Since 1 January 2023 a late VAT return earns one penalty point, and HMRC's guidance states plainly that "you'll get penalty points if you submit a VAT Return late (including nil payment returns)", the same applying to repayment returns. The threshold at which a £200 financial penalty is charged differs by filing frequency: 2 points for annual filers, 4 points for quarterly filers and 5 points for monthly filers. Once a business is at the threshold, "you'll receive a £200 penalty" and "a further £200 penalty for each subsequent late submission while you're at the threshold". Record the filing frequency, the threshold it carries, the points currently held, and how many more late submissions sit between the current position and the next £200 charge.

8. **If any of the corrected tax is still unpaid, price the late payment penalty and the interest separately, because they are two different charges on two different clocks.** Under the current rules, there is no first or second late payment penalty inside 15 days of the due date. From day 16, "the first late payment penalty is calculated at 3% on the VAT you owe at day 15." Past day 30, that first penalty is "calculated at 3% of what was outstanding at day 15 plus 3% of what is still outstanding at day 30", so up to 6% in total. A second penalty then runs daily from day 31, "calculated at a daily rate of 10% per year on the outstanding balance", charged every day until the balance is paid in full or the assessment time limit is reached. Separately, late payment interest accrues on any VAT paid late "from the first day that the payment is overdue until the day it's paid in full", calculated "at the Bank of England base rate plus 4%". These three figures are cumulative, not alternatives, and all three should be shown against the outstanding balance where one exists.

9. **If the owner reports income from self-employment or property over £50,000, note the Making Tax Digital for Income Tax overlap and its one-year transition.** From 6 April 2026, sole traders with total annual income from self-employment and property over £50,000 must use Making Tax Digital for Income Tax. For the first tax year under the regime, 2026 to 2027, "HMRC will not apply penalty points for late quarterly updates", though "penalties will still apply for late tax returns or if you pay your tax bill after the due date." Where a hospitality owner trades as a sole trader and is inside this threshold, record whether the current tax year is the transitional 2026 to 2027 year, because it changes what a late quarterly update actually costs while it lasts.

10. **Hand the finished position to Codex and let it build the registers.** Claude hands over the enumerated error list with, for every error, the accounting period, the net value, the direction of the error, the box 6 figure and the 1% working for the discovery period, the method the notice requires, the four year deadline or the deliberate-error flag, the accountant's careless, deliberate, genuine mistake and unprompted or prompted findings where given, the filing frequency and points currently held, and any outstanding balance with its due date. Codex makes no judgement at all: it tabulates what it is given, applies the arithmetic to the figures supplied, and writes anything unanswered into the gaps list. Run it from the folder holding the working papers:

    ```
    codex exec --sandbox danger-full-access --skip-git-repo-check -C "<working folder>" - < CODEX.md
    ```

    What comes back is the error register, the penalty points tracker, the late payment exposure sheet where tax is outstanding, the disclosure register with its percentage ranges, the notification pack for every Method 2 error, and gaps.md, plus the counts you check in the next section.

## Then it checks

1. Every error enumerated in step 1 appears in the error register with a method recorded, and no error's `adjustment_route` cell is blank.
2. Every error routed to Method 1 has a net value that genuinely sits inside the £10,000 or the £10,000 to £50,000 and 1% of box 6 limit worked for its own discovery period, and any error that fails that test is moved to Method 2, not left on the Method 1 list.
3. Every error has a four year deadline calculated from the correct start date for its category, and every error flagged deliberate reads "no four year limit stated by this notice, ask the accountant" rather than carrying a calculated date.
4. No error's careless, deliberate or genuine mistake finding, and no error's unprompted or prompted finding, was written by this skill rather than supplied by the accountant, and every error with neither supplied reads "not yet decided by adviser".
5. The penalty points tracker's threshold matches the filing frequency exactly, 2 for annual, 4 for quarterly, 5 for monthly, and the points held plus points from any late submission in the register are added correctly.
6. Every late payment penalty and interest figure is calculated only where an outstanding balance and a due date were supplied, and no percentage anywhere in any file is shown as a single number where the source gives a range.

Any check fails: name it, redo that step once. Failed twice: say what is wrong and stop.

## Rules
- Public information only.
- Never invent a fact, a number or a quote.
- Anything sent in someone's name says whose name it is.
- Never decide whether an error is careless, deliberate or a genuine mistake. That is a judgement for the owner's own accountant or tax adviser, it changes the penalty percentage by tens of points, and a confident wrong guess here is worse than an unanswered field.
- Never submit a correction, a notification or a disclosure to HMRC. This skill writes the working document; sending anything to HMRC is the owner's or the accountant's own action, done through their own login or their own letter.
- Never state a typical penalty percentage, a typical error rate or a typical correction outcome for a single independent business. No published figure exists for one venue, and an owner who expects the low end of a range because "that's usual" is worse prepared for a genuinely careless finding than one who sees the whole range in writing.
- Never assume a time limit or a deadline that was not read from the primary source on the day it was used. Where the notice states that a rule does not apply without stating the replacement, record that gap rather than filling it with a figure from memory or from a previous version of this pack.
- Never collapse a penalty percentage range to a single figure, and never pick unprompted or prompted disclosure without the owner's or accountant's own statement of which applies.
- This output is a working document prepared for the owner's own accountant or tax adviser to check before anything is corrected on a return, notified to HMRC, or paid. It applies published law and published HMRC guidance to the facts supplied. It is not tax advice, it is not a clearance, and it is not a ruling that any figure, deadline or category shown is correct.

## Built from
- HM Revenue and Customs, "How to correct VAT errors and make adjustments or claims (VAT Notice 700/45)", https://www.gov.uk/guidance/how-to-correct-vat-errors-and-make-adjustments-or-claims-vat-notice-70045, the page states "Last updated: 5 September 2025", read 23 September 2026: the Method 1 and Method 2 thresholds in step 2, the online notification route in step 3, and the four year time limit and the deliberate error exclusion in step 4.
- HM Revenue and Customs, "Compliance checks: penalties for inaccuracies in returns or documents (CC/FS7a)", https://www.gov.uk/government/publications/compliance-checks-penalties-for-inaccuracies-in-returns-or-documents-ccfs7a/compliance-checks-for-penalties-of-inaccuracies-in-returns-or-documents-ccfs7a-factsheet, the page states "Last updated: 21 July 2026", read 23 September 2026: the careless, deliberate and deliberate and concealed definitions in step 5, and the unprompted and prompted penalty percentage ranges in step 6.
- HM Revenue and Customs, "Penalty points and penalties if you submit your VAT Return late", https://www.gov.uk/guidance/penalty-points-and-penalties-if-you-submit-your-vat-return-late, the page states "Last updated: 1 March 2023", read 23 September 2026: the annual, quarterly and monthly points thresholds, the nil and repayment return rule, and the £200 penalty in step 7.
- HM Revenue and Customs, "How late payment penalties work if you pay VAT late", https://www.gov.uk/guidance/how-late-payment-penalties-work-if-you-pay-vat-late, the page states "Last updated: 10 July 2025", read 23 September 2026: the day 15, day 16 and day 30 first penalty structure and the daily second penalty rate in step 8.
- HM Revenue and Customs, "Late payment interest if you do not pay VAT or penalties on time", https://www.gov.uk/guidance/late-payment-interest-if-you-do-not-pay-vat-or-penalties-on-time, the page states "Last updated: 6 February 2026", read 23 September 2026: the Bank of England base rate plus 4% calculation in step 8.
- HM Revenue and Customs, "Sign up for Making Tax Digital for Income Tax", https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-income-tax, the page states "Last updated: 24 August 2026", read 23 September 2026: the £50,000 threshold, the 6 April 2026 start date and the 2026 to 2027 transitional waiver on penalty points for late quarterly updates in step 9.

# making-a-correction

## You are given
The enumerated list of VAT errors found across past returns for one UK hospitality business, each with the accounting period, the box or boxes affected, the net value in pounds, the direction of the error (under-declared output tax, over-declared output tax, under-claimed input tax or over-claimed input tax), the source document that surfaced it, and the date discovered. The box 6 (net outputs) figure for the VAT return period each error was discovered in, and 1% of that figure already calculated. For every error, the correction method already worked out under VAT Notice 700/45, Method 1 or Method 2, and where Method 2 applies, which of the three grounds triggered it. The four year deadline already calculated for every error, or the words "no four year limit stated by this notice, ask the accountant" for any error flagged deliberate. The accountant's own finding on whether each error is careless, deliberate, deliberate and concealed, or not yet decided, and separately whether disclosure is unprompted, prompted, or not yet decided, with the Schedule 24 penalty percentage range already looked up. The filing frequency, exactly one of annual, quarterly or monthly, the penalty points threshold that carries, and the points currently held. Any outstanding VAT balance still unpaid, with its due date and the date the position is calculated as at. Whether the owner trades as a sole trader with income from self-employment and property over £50,000, and if so whether the current tax year is 2026 to 2027. All judgement calls, including every correction method, every behaviour and disclosure finding, and which errors are deliberate, have already been made and are supplied to you.

## Produce
Write into a `./making-a-correction-output/` folder:

1. `error-register.csv` with these columns in this order: `error_ref`, `vat_period_start`, `vat_period_end`, `box_or_boxes_affected`, `net_value_gbp`, `error_direction`, `source_document`, `date_discovered`, `discovery_period_box6_gbp`, `discovery_period_one_percent_box6_gbp`, `adjustment_route`, `method_2_ground`, `within_method_1_threshold`, `four_year_deadline`, `careless_deliberate_or_genuine_mistake`, `disclosure_type`, `penalty_percent_low`, `penalty_percent_high`. `error_ref` is E001 upward, one row per error. `error_direction` is exactly one of `under-declared output tax`, `over-declared output tax`, `under-claimed input tax`, `over-claimed input tax`. `adjustment_route` is exactly one of `method 1`, `method 2`. `method_2_ground` is exactly one of `between GBP 10,000 and GBP 50,000 and exceeds 1 percent of box 6`, `greater than GBP 50,000`, `made deliberately`, `not applicable`. `within_method_1_threshold` is `yes` or `no`. `four_year_deadline` is either a DD Month YYYY date or the exact string `no four year limit stated by this notice, ask the accountant`. `careless_deliberate_or_genuine_mistake` is exactly one of `careless`, `deliberate`, `deliberate and concealed`, `genuine mistake`, `not yet decided by adviser`. `disclosure_type` is exactly one of `unprompted`, `prompted`, `not yet decided by adviser`. `penalty_percent_low` and `penalty_percent_high` are left empty where `careless_deliberate_or_genuine_mistake` or `disclosure_type` reads `not yet decided by adviser` or where the finding is `genuine mistake`.
2. `penalty-points-tracker.csv` with columns: `filing_frequency`, `points_threshold`, `points_held_before`, `late_submissions_in_this_register`, `points_held_now`, `at_threshold`, `submissions_until_next_gbp200_penalty`, `nil_or_repayment_returns_included`. One row only. `filing_frequency` is exactly one of `annual`, `quarterly`, `monthly`. `points_threshold` is exactly `2`, `4` or `5`, matching `filing_frequency`. `at_threshold` is `yes` or `no`. `nil_or_repayment_returns_included` is `yes`, confirming the count already covers them.
3. `late-payment-exposure.csv` with columns: `outstanding_balance_gbp`, `due_date`, `as_at_date`, `days_overdue`, `first_penalty_day16to30_percent`, `first_penalty_day31plus_percent`, `first_penalty_gbp`, `second_penalty_daily_rate_percent_per_year`, `second_penalty_accrued_gbp`, `late_payment_interest_rate_percent`, `late_payment_interest_accrued_gbp`. Produce this file only where an outstanding balance was supplied; where none was supplied, write the file with a single row stating `no outstanding balance supplied` in the `outstanding_balance_gbp` column and every other column empty. `first_penalty_day16to30_percent` is always `3`. `first_penalty_day31plus_percent` is `3` where `days_overdue` is between 16 and 30 and `6` where `days_overdue` is 31 or more. `second_penalty_daily_rate_percent_per_year` is always `10`. `late_payment_interest_rate_percent` is only populated if the Bank of England base rate on `as_at_date` was supplied; otherwise it is left empty and the gap is recorded in `gaps.md`.
4. `notification-pack.md` with one section per error whose `adjustment_route` is `method 2`, each section headed by the `error_ref` and containing, on separate lines, the VAT period, the box or boxes affected, the net value, how the error arose (copied verbatim from the source document description supplied), and the corrected figures where supplied. If no corrected figures were supplied for a Method 2 error, write `corrected figures not supplied` on that line and record it in `gaps.md`.
5. `mtd-itsa-note.md` recording, only where the owner was flagged as a sole trader with income over £50,000: the income figure and the date it refers to, confirmation that Making Tax Digital for Income Tax applies from 6 April 2026, whether the current tax year is 2026 to 2027, and if so the sentence that penalty points for late quarterly updates do not apply this year but penalties for late tax returns and late payment still do. Where the owner was not flagged this way, write the single line `not applicable, income threshold not flagged`.
6. `gaps.md` a numbered list of: every error with an empty `adjustment_route`; every error whose `careless_deliberate_or_genuine_mistake` or `disclosure_type` reads `not yet decided by adviser`; every error flagged deliberate with a `four_year_deadline` that is not the fixed string above; every Method 2 error in `notification-pack.md` with no corrected figures supplied; the `late_payment_interest_rate_percent` gap where no base rate was supplied; and any figure supplied without a date attached to it.

## Rules
- Codex tabulates, calculates arithmetic and cross checks only. It never decides a correction method, never assigns careless, deliberate or genuine mistake, never assigns unprompted or prompted, and never calculates a four year deadline for an error already flagged deliberate. Every one of those was decided before the file reached Codex.
- A row with no supplied classification gets the `not yet decided by adviser` value and a line in `gaps.md`. It is never inferred from the net value, the error direction or anything else in the row.
- Never write a penalty percentage as a single figure. `penalty_percent_low` and `penalty_percent_high` are always a pair, and both are left empty rather than guessed at when the classification is not yet decided.
- Never write a typical error rate or any industry benchmark into any file. No such figure exists for a single independent UK hospitality business and none is to be recorded.
- Never carry a deadline, a percentage or a classification forward from a previous register. Only figures supplied in this run are used; an older register supplied for comparison sits in a separate column and is never used in a calculation.
- Use British English, GBP written as `GBP` or the pound sign, and DD Month YYYY dates. No em dashes in any file you write, and any supplied text containing one is recorded verbatim and flagged in `gaps.md`.
- Every quoted source document name and every verbatim description is copied exactly, including its punctuation and capitalisation.
- Every file ends with this line: this is a working document prepared for the owner's own accountant or tax adviser to check before anything is corrected, notified to HMRC, or paid. It applies supplied decisions to the supplied facts and is not a ruling that any figure, deadline or category shown is correct.

## Return
The absolute path of every file written, the row count of `error-register.csv`, the count of errors on Method 1 against the count on Method 2 with the ground for each Method 2 error, the count of errors flagged deliberate with no calculated deadline, the count of errors still reading `not yet decided by adviser` for either classification, the filing frequency and whether it is at the penalty points threshold, whether a late payment exposure was calculated and if so the total of the first penalty, the second penalty and the interest accrued, the count of Method 2 errors in `notification-pack.md` missing corrected figures, whether `mtd-itsa-note.md` was populated or marked not applicable, and the `gaps.md` item count.