Commentary

V5.196 Interest on VAT overaccounted, etc

Part V5 Compliance, enforcement and appeals

V5.196 Interest on VAT overaccounted, etc

V5.196 Interest on VAT overaccounted, etc

VAT accounting periods starting before May 2022

HMRC is liable to pay interest to a person if, due to an error on the part of HMRC1:

  1.  

    (1)     he has accounted for an amount by way of output tax which was not due from him

  2.  

    (2)     he has failed to claim input tax credit for an amount to which he was entitled

  3.  

    (3)     he has otherwise paid to HMRC an amount by way of VAT which was not due, or

  4.  

    (4)     he has suffered delay in receiving payment2 of an amount due from HMRC in connection with VAT

With effect from 1 January 2014, the payment of interest also applies to payments of VAT in respect of supplies deemed to be made in the UK under the EU and non-EU schemes for supplies of electronic, telecommunications and broadcasting services (for which see V2.189E–V2.189X)3.

In the case of head 1, interest is due on the net amount (ie output tax overaccounted for less any input tax which ceases to be recoverable)4.

An amount due under head 4 includes interest. Thus, to the extent that a trader has made a claim for interest and has suffered delay in receiving payment thereof due to an error on the part of HMRC, he is entitled to interest on the amount paid5.

The following conditions must be met6:

  1.  

    •     the event in heads 1–4 above must be due to an error on the part of HMRC

  2.  

    •     HMRC must be liable to pay or

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