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HMRC internal manual

VAT Repayment Supplement Manual

Reconsideration, reduction and recovery

Reconsideration of decision on repayment supplement where we have made an error

Repayment supplement is normally calculated and paid automatically when due. However, if the wrong number of days is input to the VAT mainframe, a supplement may not be paid when it is due.

If a trader requests repayment supplement you should report the circumstances immediately to the Repayment Supplement Team. They will investigate and either authorise a supplement to be paid or write to the trader explaining why a supplement is not due.

It is important you do not anticipate the Repayment Supplement Team’s decision by telling a trader that a supplement will or will not be paid. You should tell the trader that the request will be considered and they will receive a reply shortly.

Where repayment supplement has not been paid but you think that it should have been paid, you should refer the case to the Repayment Supplement Team.

Reduction of repayment supplement already paid

Where an officer’s assessment or error correction reduces the net amount claimed on the return

  • by more than 5% or £250, whichever is greater, repayment supplement will no longer be due and the whole of the repayment supplement will need to be recovered,
  • by less than 5% or £250, the amount of repayment supplement will be recalculated and the amount overpaid will need to be recovered.

If it is found that there is now tax due for the period (taking account of the return and assessment or error correction) which exceeds the amount on which repayment supplement was originally paid by 5% or £250, repayment supplement will have been overpaid.

The Repayment Supplement Team is notified automatically where an officer’s assessment or error correction is processed for a period on which repayment supplement has already been paid. In all circumstances the team will establish the value of the repayment supplement overpaid and take action to recover it.

Where a claim is increased, repayment supplement could still be due on the original amount but not on any amount notified after the submission of the original return.

Recovery of repayment supplement paid in error

Entitlement to repayment supplement is assessed automatically by the VAT mainframe at the time the written instruction is issued. This is dependent on the information entered into TRUCE by the officer and verified by the countersigning officer.

Where repayment supplement has not been paid but you think that it should have been paid, you should refer the case to the Repayment Supplement Team.

The Repayment Supplement Team examine the events that have taken place from the date the return or claim was received until the date of the issue of the written instruction to make the payment or refund. They will make sure that repayment supplement has been paid correctly.

There are times, however, when repayment supplement 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
  • the incorrect date of receipt has been recorded on the VAT mainframe
  • the date of first contact is incorrect or has not been noted on the finalised pre-repayment credibility query.

If it is found that repayment supplement has been paid in error, the Repayment Supplement Team will take action to recover it.

Recovery of repayment supplement is by virtue of section 79(5) (a) VATA which provides 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 in section 77(1) (a) VATA and section 73(6) VATA.

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