VAEC4140 - Recovery assessments: Recovery of statutory interest under Section 78A

This guidance deals with interest matters in respect of prescribed accounting periods starting on or before 31 December 2022. Interest matters with effect from 01 January 2023 are dealt with under Finance Act 2009.

Please see Compliance Handbook page CH140000 onwards to find the new interest rules guidance.

The procedural guidance in this manual only covers the VAT Mainframe and VISION processes. For guidance on the Making Tax Digital and ETMP processes for fully migrated customers, see VAEC0200 and the Making Tax Digital for VAT compliance toolkit.

When you are making a recovery assessment, whether under Section 80(4A) or under section 73(2), you may also need to assess for recovery of any related statutory interest which was paid to the trader.

The legal powers for recovery of statutory interest are in Section 78A VAT Act 1994.

Assessments under section 78A can only be made where the amount to be recovered was paid on or after 18 July 1996.

Time limits

The time limits are contained in Section 78A(2) and you have 2 years from evidence of facts in which to make an assessment.

Recovery of statutory interest under section 78A

Prepare VAT 641 using a “00/00” period, Attribution Code 9 and Type Code “0”. Once input, this will put the debt on file and avoid corrupting any accounting period details for misdeclaration penalty and interest purposes.

The output document produced by the computer should be suppressed and the assessment notified by letter.