VAT Consultant
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Delayed DIY repayment – interest payable?

4th Dec 2017
VAT Consultant
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The operation of the Do-It-Yourself (DIY) builders scheme has deteriorated.

The recent OTS report highlighted a higher rejection rate. In part this is due to poorly prepared claims, but it is partly due to poor HMRC decision making. The cynic in me thinks it is down to Officers looking for reasons NOT to pay out!

Even on valid claims, there is anecdotal evidence that correct claims are taking much longer to process.

So, can the claimant seek interest or compensation? Since he/she has already paid out for the project, any delay will be especially unwelcome.

It seemed to me that there are two alternatives;

  • Statutory interest (s78); or
  • Repayment Supplement (s79).

Taking RS first, s79(6)(b) restricts claims to refunds under s33. DIY claims are made under s35, which indicates the claimant cannot claim Repayment Supplement.

Statutory Interest looks more favourable. S78(1)(d) reads; “Where, due to an error on the part of the Commissioners, a person has suffered delay in receiving payment of an amount due to him from them in connection with VAT … they shall pay interest.” S78(10) adds that the claimant has to claim for interest; HMRC will not automatically send it.

I must express thanks for this forum post for inspiring me to write this:

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