Readers’ forum: Stolen cash: what about VAT?

One of my clients recently discovered that a member of staff has stolen cash from the till (£150/week for three years). This cash related to sales that were never rung into the till so no VAT has been declared.

What is the best way to deal with this? As the amount of VAT is less than £10 000 can my client make an entry in Box 1 of his next return? Also 10% of the business sales are zero-rated so is it reasonable to only account for output tax on £135 per week of suppressed sales ie £150 less 10%?

If we cannot include the tax on our next VAT return – and must disclose the underpayment to HMRC on form VAT652 – what will HMRC do about penalties and interest? Presumably the penalty can be suspended as the underpayment was due to the dishonesty of...