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HMRC internal manual

VAT Default Interest Manual

Circumstances affecting default interest: Deregistration

Before assessment

The fact that a taxpayer has deregistered is not in itself a reason for inhibiting interest due for under declarations on returns before deregistration date, but any assessment input after the date of deregistration for periods during registration may be rejected. The VAT641 will not be accepted if it contains a period ending later than the deregistration date. This is because periods after the deregistration date are deleted at the time the VAT30 Advice of Deregistration is processed. The VAT641 rejects because a matching period record does not exist, which means no interest will be charged either. If interest should be charged it will need to be calculated manually using the VISION option, see VDIM8000, and a letter sent to the taxpayer showing details of the interest charged.

Where all the periods on the VAT641 end prior to deregistration date interest will only be calculated if the calculation date (start date) is before deregistration. If the calculation date is after deregistration and interest is due, you will need to make a manual calculation as before.

After assessment

If a taxpayer deregisters, any interest charged between the deregistration date and the date the assessment was calculated will be curtailed automatically once the “Z” or deregistration date appears on the Interest calculation table on VISION.

When interest is not appropriate

If a taxpayer’s deregistration date is amended, this could leave an assessment or error notification on file which covers a period when the business was not registered. If this happens you should reduce or withdraw the assessment or error notification as appropriate; this will result in the automatic reduction or withdrawal of any interest charge.