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HMRC internal manual

VAT Accounting Manual

Accounting for VAT: payments of VAT claimed on returns: legal framework for VAT payments

Section 25 of the VAT Act 1994 contains the power under which the Commissioners pay VAT claimed on a VAT return.

Section 25(2) provides the basic entitlement to a credit for input tax. Section 25(3) defines the excess of input tax over output tax as a “VAT credit” and provides that any such VAT credit “shall” be paid.

Provided, therefore, a VAT credit arises, there is a clear duty on the Commissioners to make the payment and to make it with reasonable speed. There is, however, a power to verify VAT returns before repayment and the considerations proper to launching verification without repayment are explained in VATAC1540 and VATAC1550.