VSME10850 - Event audit screens on EF: default interest

When completing the Officer’s assessment screen you should also consider default interest. Interest should only be assessed for when “commercial restitution” is required. This is the compensation required when the Exchequer has been deprived of an amount of VAT for a period of time when a trader has:

  • failed to render a VAT return and accepted a central assessment that is too low; and/or
  • underdeclared the amount of VAT due on a VAT return where none of the VAT is recoverable by a third party as if it were input tax.

The compensation is charged as interest for loss of use of the money. So, if a business has underdeclared an amount of VAT, which would have been reclaimed as input tax by a third party, and then there has been no loss to the Exchequer.

Further guidance on default interest can be found at VATCP 10891.