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HMRC internal manual

VAT Repayment Supplement Manual

HM Revenue & Customs
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Introduction: what is repayment supplement

Repayment supplement (RS) was introduced in October 1986 following recommendations made in 1983 by the independent Keith Committee on Enforcement Powers of Revenue Departments.

The Committee considered that if a surcharge was to be applied as a result of a delayed payment of VAT by businesses, then a form of supplement was appropriate when the Commissioners delayed repayment of certain claims to businesses.

RS was therefore originally (and still is) designed to encourage prompt and efficient responses at the various stages of return and claim processing, from receipt through to payment. It is entirely proper that repayments are withheld where we need time to confirm entitlement. However RS is now also recognised as a form of compensation in respect of undue delay in processing VAT repayment returns, or claims by certain bodies allowable under sections 33, 33A, 33B and 33C VAT Act 1994.

The existence of RS should never prevent us from making justified pre-repayment enquiries. The credibility of all VAT returns is of critical importance and provided we carry out reasonable and justified enquiries relating to a claim, there should be no liability to pay RS.

We must always aim to identify and correctly pay RS to all eligible traders without undue delay.