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HMRC internal manual

VAT Refunds

Unjust enrichment: Reimbursement: Is statutory interest included in the scheme

Statutory interest also falls within the scope of the scheme, and is subject to the same terms and conditions as any other money reimbursed under the scheme. 

It must be reimbursed to the customer because it was the customer who did not have use of the money, not the claimant (who simply collected it from the customer to pay to HM Revenue & Customs). Any statutory interest must be refunded in full and any amounts not reimbursed must be returned to HMRC within the specified time limit.

It may be difficult for businesses to divide the interest among their customers because some payments may have been received earlier than others. The regulations do not specify how this problem is to be overcome.

However, one answer may be to give the business a print-out of the statutory interest calculation, which calculates simple interest (rather than compound) on a period by period basis. Businesses will then be able to divide interest payable into the amount overpaid for that period. This should determine roughly what is due to customers for that particular period.