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HMRC internal manual

VAT Default Interest Manual

When to inhibit, amend or withdraw interest: discretion to inhibit interest

Section 76 of the Value Added Tax Act 1994 gives HMRC the power to assess interest, see VDIM2010 when a taxpayer under declares or over claims VAT. 

The use of the word “may” removes any compulsion to apply interest and allows HMRC some discretion. It is very important that the use of discretion is seen to be fair and unbiased. The facts of each case should be considered in a fair and unbiased way which enables a decision to be reached purely on the individual merits of the case.

By charging interest only where it represents commercial restitution HMRC’s use of discretion can be seen to be fair and unbiased. Please also refer to VDIM8000 for guidance on how to inhibit, amend or withdraw interest.

For guidance on when you may need to inhibit, withdraw or amend an interest charge see