V5.361 Amounts which carry interest
Tax, an amount assessed as being tax or an amount taken as representing tax carries interest if it arises in the circumstances set out below.
Any interest assessed under this provision is not deductible in computing any income, profits of losses for any tax purposes1.
Assessment carrying interest
(i) Assessment made under VATA 1994 s 73(1)2 (failure to make returns, incorrect returns, etc)
An assessment in respect of a failure to submit a return or an inaccuracy in a return carries interest if one or more of the following conditions is fulfilled3—
(1) a return has previously been made in respect of the prescribed accounting period, or an earlier assessment has already been notified to the person concerned in respect of the prescribed accounting period;
(2) the prescribed accounting period to which the assessment relates exceeds three months in length and begins on the date from which the person concerned was, or was required to be, registered for the purposes of VAT;
(3) the assessment relates to a prescribed accounting period at the beginning of which the person concerned was, but should no longer have been, exempted from registration4.
It can be seen that condition (1) may preclude the charging of interest where a return has not been submitted for a prescribed accounting period. In such cases, the default surcharge regime comes into play (see V5.371–V5.381).
The whole of the amount assessed carries interest at the prescribed rate5 from the reckonable date until the date on
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