VSIM4400 - Amount on which statutory interest is calculated: No liability to pay statutory interest on incorrectly imposed penalties or interest

This guidance deals with interest matters in respect of prescribed accounting periods starting on or before 31 December 2022. Interest matters with effect from 01 January 2023 are dealt with under Finance Act 2009.

Please see Compliance Handbook page CH140000 onwards to find the new interest rules guidance.

Statutory interest is not payable on incorrectly levied penalties or default interest. This is because they are not VAT and therefore do not fall within the scope of section 78(1) (a) to (c).

VATA section 78(1) (d) (delayed payment of an amount in connection with VAT) however allows payment of statutory interest where repayment of incorrectly levied penalties and interest is unreasonably delayed due to official error.

VATA S78(1)