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HMRC internal manual

VAT Civil Penalties

Insurance Premium Tax: Calculation and notification of a penalty: Interest on recovery assessments

Please note: penalties under Schedule 7 Finance Act 1994 for failure to notify liability to register have been replaced by the Failure to Notify penalty introduced by Schedule 41 Finance Act 2008. The Failure to Notify penalty applies where an obligation to notify liability to register for IPT occurs on or after 01/04/2010. Penalties under Schedule 7 Finance Act 1994 will continue to apply where an obligation to notify occurs before 01/04/2010.

Please see the Compliance Handbook CH70000 for more information about the Failure to Notify penalty.

Please note: penalties under the Finance Act 1994 for failure to provide information and failure to produce records have now been replaced by penalties under Schedule 36 Finance Act 2008 where HMRC have requested information or documents on or after 01 /04/2010. If HMRC requested information or documents before 01/04/2010 the Finance Act 1994 penalties will continue to apply.

Please the Compliance Handbook CH20000 for more information about information and inspection powers.

The 2 year rule in the Finance Act 1997 paragraph 17(3) states that an interest assessment for an excessive repayment of tax or interest can only cover a period of 2 years prior to the date of the interest assessment.

However there is no overall time limit for which interest can be charged and provided any interest due is notified promptly (in any event within the 2 year period) interest assessments can continue to be made until the recovery assessment is paid.

If the Department make a repayment of tax or a payment of interest which should not have been made we can issue a recovery assessment to recover the overpayment .

Interest is payable on the recovery assessment from the date of the assessment until the day before the assessment is paid if the assessment is not paid within 30 days of the date the assessment is notified.

We cannot issue a penalty or interest assessment for dates before 1 October 1994 as there was no liability before this date.

The computer system calculates interest indefinitely until the debt is paid. You should monitor the interest assessments to ensure interest is not charged beyond the legal time limit .

The computer system will assume the interest is calculated from the due date + 1 of the accounting period.

If interest is due to be calculated from the seventh day after the authorisation date (assessment for repayment returns) or from the date of issue of a recovery assessment, a manual adjustment to the interest charge will need to be made.