The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.
This guidance note provides an overview of the situations when HMRC may be required to pay a business interest due to the fact that it has made an official error which has resulted in the business paying too much VAT.
It is worth noting that there are plans to harmonise the interest rules for VAT to ensure that they follow similar rules to income tax self assessment. These rules will apply to VAT accounting periods starting after April 2022. The legislation underpinning these changes is contained within Finance Act 2021.
If HMRC makes one of the following types of errors, it will be required to pay the business interest on the amount. The business has:
accounted for output tax incorrectly and as a result, has overpaid VAT and HMRC is required to repay the overpaid VAT
did not claim input tax that was entitled to and HMRC is required to repay this input VAT
paid another amount of tax to HMRC that should not have been accounted for as VAT
suffered delay in receiving payment of an amount due from HMRC in connection with VAT (including, for example, a refund under the DIY builder’s scheme or under (1)–(3) above but excluding any interest due under this provision)
VATA 1994, ss 79, 78; SI 1995/2518, regs 198, 199
HMRC is also required to pay interest to a business if it made a mistake that resulted in the business waiting an unreasonable amount of time
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
RDEC ― large company R&D reliefSince 1 April 2016, or from 1 April 2013 by election, large company R&D relief is given through research and development expenditure credits (RDEC), which is a taxable credit payable to the company. As the credit is taxable, it is also sometimes called an above the
OutlineFor income and capital gains tax purposes, partnerships are regarded as being tax transparent ― ie they are not taxed in their own right but instead taxation is applied to the partners.Accordingly, if the partners are individuals, then much the same considerations apply as for an individual
Companies sometimes provide directors, employees or shareholders with low interest (or interest-free) loans either as part of the reward package or on special occasions to help the individual meet significant expenditure. The employment income implications of these loans are discussed in detail in
Interest paid on qualifying loans is deducted from the taxpayer’s total income (ie a Step 2 deduction from total income). See the Proforma income tax calculation guidance note.Interest on qualifying loans is usually paid gross by the individual borrower; tax is not withheld at source. This includes
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.