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HMRC internal manual

VAT Default Interest Manual

HM Revenue & Customs
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Commercial restitution: Whether to charge interest or not

It is important to remember that each case must be dealt with on its own merits; a decision whether or not to charge interest made on one taxpayer’s circumstances should not influence the outcome of another case. There will be difficult cases where you know very little about the taxpayer’s customers or where the supply is large and complex. Generally speaking resources should not be concentrated on enquiries that establish the input tax position of third parties, nevertheless interest should be inhibited if there is a doubt as to whether commercial restitution applies.

There is no provision in law for ‘reasonable excuse’ as a defence against interest or for mitigating circumstances to allow a reduction in the charge. You should however encourage, where possible, the taxpayer to give full details of how the under declaration or over claim arose in order to help you make your decision.