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HMRC internal manual

VAT Repayment Supplement Manual

HM Revenue & Customs
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Reduction or recovery of a repayment supplement: recovery of repayment supplement paid in error

Entitlement to repayment supplement (RS) is assessed automatically by the VAT mainframe at the time the repayment is authorised. All payments of RS are checked by the Repayment Supplement team.

They examine the events that have taken place between the dates the return or claim was received until the date of the written instruction directing the making of the payment or refund was issued.

This makes sure that RS has been paid correctly. There are times however when RS is paid in error. The most common reasons are where:

  • the number of deductible days has been miscalculated
  • the number of deductible days has been incorrectly keyed
  • an incorrect date of receipt has been recorded on the VAT return
  • the date of first contact is incorrect or has not been noted on the finalised pre-repayment credibility query.

If it is found that RS has been paid in error the Repayment Supplement team will take action to recover it.

Recovery of RS is by virtue of section 79(5)(a) VATA providing for it to be treated as a VAT credit under section 25 VATA. This means that a recovery assessment under section 73(2) VATA can be issued subject to the time limits found in section 77(1)(a) VATA and section 73(6) VATA.

Although default interest is chargeable on assessments issued under section 73(2) VATA, RS does not fall within the scope and so default interest must not be charged.