Commentary

700/43/10 Default interest

Part V8 HMRC Notices
Part V8 HMRC Notices | Commentary

700/43/10 Default interest

Part V8 HMRC Notices | Commentary

700/43/10
Default interest

May 2010

This notice cancels and replaces Notice 700/43 (June 2009).

1 Introduction

1.1 What is this notice about?

This notice explains how default interest works and when it is applied. It also gives advice about what to do if you think you have been charged too much interest.

1.2 What is default interest?

Default interest was first introduced by FA 1985 s 18 and it affects VAT periods starting on or after 1 April 1990 Initially it is charged where appropriate on any amount of VAT which has been underdeclared or overclaimed, form the time the amount should have been paid to the time it is assessed.

Default interest is intended to provide commercial restitution for the loss of understated or overclaimed VAT and should not be considered a penalty. What we mean by “commercial restitution” is explained in section 2.2.

Main narrative treatment—V5.361–V5.365.

2 How default interest works

2.1 Circumstances in which interest is charged

You may be charged interest where:

  1.  

    —     we find you have underdeclared or overclaimed VAT on your VAT returns, or

  2.  

    —     you fail to render a VAT return for any period, and instead accept a central assessment which is later found to be too low, or

  3.  

    —     you submit an error correction (formerly known as a “voluntary disclosure”) to your VAT office for underdeclarations or overclaims of any amount.

In general, however, we will only charge interest where we consider it represents commercial restitution.

Main narrative treatment—V5.361–V5.365.

2.2 What is commercial restitution?

By “commercial restitution” we mean compensation for the loss of use of any underdeclared

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