Independent VAT Consultant
Columnist
Share this content
A picture of a calculator and HMRC
istock_HMRC-VAT_stocknshares
Tags:

HMRC to abolish repayment supplement for 0.5% interest payment

by

HMRC will pay 0.5% annual interest on delayed VAT claims from April 2022. But the end of the repayment supplement scheme will be a bigger loss, says Neil Warren.

2nd Jun 2021
Independent VAT Consultant
Columnist
Share this content

Most advisers are aware that if HMRC delays repaying a VAT return claim by more than 30 days (plus additional days to give it a reasonable length of time to make enquiries) it will pay a repayment supplement equal to 5% of the repayment amount or £50, whichever is greater.

There is no supplement paid, however, if the claim is significantly adjusted because of errors made on the return. The government’s intention is that the repayment supplement scheme will be scrapped for VAT periods beginning on or after 1 April 2022. But that is not the end of the story.

Interest concession

A recent amendment to Finance Bill 2021 (Amendment 19) means that HMRC will pay interest if it delays a repayment VAT return to check the figures – effective for periods beginning on or after 1 April 2022.

This is great news, you might think, but what is the bottom-line benefit to a business? And is this a fair trade-in for the loss of the repayment supplement scheme?

Example

Widgets Ltd has purchased a big piece of equipment and submitted a repayment VAT return for £100,000 mainly due to input tax claimed on the equipment.

The return was submitted on time but due to inefficient delays caused by the HMRC reviewing officer, it was not repaid for four months. With the repayment supplement regime, the company will currently get £5,000 (£100,000 x 5%) but only £125 interest after April 2022.

Register for free to continue reading

It’s 100% free and provides unlimited access to the latest accounting news, advice and insight every day. As well as access to this exclusive article, you can:

View all AccountingWEB content
Comment on articles
Watch our digital shows and more

Access content now

Already have an account?
Tags:

Replies (4)

Please login or register to join the discussion.

avatar
By [email protected]
02nd Jun 2021 10:22

Welcome to the world of other taxes. My client has been waiting over 6 months for £45K corporation tax repayment despite the repayment box being ticked on the return and the bank details included on the form. I have made 2 follow up telephone calls and been given promises about the repayment being processed but the money has yet to appear. The problem with lower rates is that HMRC has no incentive to repay the taxpayer because their cost of borrowing is so low.

Thanks (1)
Replying to [email protected]:
Chris M
By mr. mischief
02nd Jun 2021 12:03

Rosalind. I had a slow pay corporation tax claim. Only when I raised a formal Complaint Case and threaten a Compensation Claim did HMRC get their fingers out. On two separate occasions the client was promised on the phone - November 2020 and January 2021 - that the repayment was in the process for "the next 2 weeks". Finally we got the money in March.

Just complain and do the compensation claim, that wakes them up.

Thanks (1)
By Nebs
02nd Jun 2021 12:02

Good way to fund the deficit.

Thank you for your claim to repayment. Your repayment of £100,000 is agreed and you have been added to the queue. We expect to process your repayment in the year 2071 at which time you will be pleased to hear that your repayment will have grown to £125,000.

Thanks (0)
avatar
By VATs-enough
02nd Jun 2021 18:05

Thanks Neil

No way to dress this up as anything except bad news for VAT registered businesses.

As you well know, like myself as ex-HMCE, the only thing that gets them moving with claims was the threat of RS. Remove that, and there is zero incentive to repay VAT claims.

Unlike Corp Tax repayments, VAT is real time cash flow. Yes, I know any tax rebate is important, a refund is a refund after all. But I've seen too many businesses either go under or almost go under due to tardy VAT claim handling.

Keep your interest payments, SOS...

Thanks (0)