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HMRC internal manual

VAT Statutory Interest Manual

From
HM Revenue & Customs
Updated
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The law and legal powers: in what circumstances is statutory interest due

Section 78(1) VAT Act 1994 requires HMRC to pay interest where due to an error by HMRC a person has

‘(a) accounted to them for an amount by way of output tax which was not output tax due from him [and, as a result, they are liable under section 80(2A) to pay (or repay) an amount to him], or’

This subsection provides for paying statutory interest on claims for refund of over-declared VAT made under VATA section 80(1) or (1A)

‘(b) failed to claim credit under section 25 for an amount for which he was entitled so to claim credit and which they are in consequence liable to pay him, or’

This subsection provides for paying statutory interest on late claims for input tax

‘(c ) (otherwise than in a case falling within paragraph (a) or (b) above) paid to them by way of VAT an amount that was not VAT due and which they are in consequence liable to repay to him, or’

This subsection provides for paying statutory interest on claims under VATA section 80 (1B) where a duplicate payment was made, for example as a result of a return being paid twice. This also provides for paying statutory interest on amounts paid on assessments for amounts thought to have been incorrectly deducted as input tax

‘(d) suffered delay in receiving payment of an amount due in connection with VAT,’

This subsection provides for paying statutory interest for example where there has been an excessive delay in processing an authorised repayment claim, or perhaps refunding an incorrect civil penalty.

The reference to VATA section 80(2A) was inserted by virtue of section 4(2) Finance (Number 2) Act 2005 with effect in any case where a claim under section 80(2) was made on or after 26th May 2005, whenever the event occurred in respect of which the claim is made.

VATA 1994 section 78(1)