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HMRC internal manual

VAT Statutory Interest Manual

Introduction: what is statutory interest

Statutory Interest (SI) was introduced in August 1991 and gave taxpayers the right to claim interest (see VSIM2300 for how to make a claim). Prior to this the then Commissioners of HMC&E were not under any statutory obligation to pay interest on refunds of VAT. The exception to this was when they were directed by a court or tribunal to pay interest.

SI is intended to provide commercial restitution (compensation to the party deprived of the use of the money it is owed) where a taxpayer has overpaid or under claimed VAT as a result of an official error by HMRC, see VSIM2100 and VSIM3100.

The law does not provide for SI to be paid where an overpayment is the result of an error by the taxpayer or their accounting systems. Consequently, SI is not due when HMRC made an error due to incorrect information provided by the taxpayer.