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HMRC internal manual

VAT Default Interest Manual

When to inhibit, amend or withdraw interest: Complicated retrospective agreements

There may be occasions where you enter into retrospective arrangements with taxpayers, for example the revised partial exemption scheme. 

Where we have no powers to enforce backdating and it is applied from an earlier date purely by mutual agreement, an error correction will be needed to correct the VAT.

In these circumstances it would be unreasonable to charge interest and an inhibit is therefore appropriate.