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Value Added Tax

VAT repayment supplement

Produced by Tolley
  • 04 Apr 2022 11:43

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • VAT repayment supplement
  • When is HMRC required to pay the repayment supplement?
  • How are the ‘net days’ calculated?
  • Qualifying conditions
  • Paying repayment supplement
  • Appealing against HMRC’s decision

VAT repayment supplement

This guidance note provides an overview of when HMRC would be expected to pay a repayment supplement to a business.

See ‘Back to basics ― VAT refunds, repayment supplement and interest’ by Karen Bullen in Tax Journal, Issue 1066, 21 (25 February 2011).

It is expected that the VAT repayment supplement will be abolished with effect for periods beginning on or after 1 January 2023 and a harmonised system of repayment interest will replace it. See the Penalties and interest for late payment guidance note for more information.

When is HMRC required to pay the repayment supplement?

If HMRC does not authorise payment of a legitimate refund claim within 30 net days from receipt of the VAT return, it is liable to pay the business a repayment supplement which is a form of compensation.

The 30 days’ time period normally runs from the date that the VAT return was received by HMRC. However, if the VAT return is received before the end of the VAT return accounting period, the 30-day period will not start until the first day of the following month.

Legislation allows HMRC to effectively stop the 30-day clock in the following circumstances:

  1. •

    so reasonable enquires can be undertaken to confirm that a legitimate refund claim has been submitted

  2. •

    to correct any errors or omissions that have occurred in respect of the VAT return figures submitted

HMRC must ensure that once it has subtracted time spent on the above activities, the VAT return payment is made within 30 days of the

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