Revenue Note for Guidance

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Revenue Note for Guidance

Chapter 3 - Interest and penalties

114. Interest payable by accountable persons

Summary

This section provides for the charging of simple interest on a daily basis where tax due is not paid and where a VAT refund is over-claimed. The rate is 0.0274% per day.

Details

(1) Simple interest is charged on a daily basis where any amount of tax becomes payable by an accountable person but is not paid. The simple interest will be calculated from the date on which the amount becomes payable.

(2) Simple interest is charged on a daily basis in cases where a VAT refund has been made, but either—

  • No amount of tax was properly refundable, or
  • The amount of tax refunded was greater than the amount that was properly refundable.

Simple interest will be charged at a rate of 0.0274% per day, or part of a day, during which the amount remains unpaid.

(3) A legislative basis exists for charging simple interest on any balance of VAT that remains unpaid following the making of VAT payments under the direct debit scheme (section 77(2)). Where more than 20% of the accountable person’s actual liability for that accounting period has been underpaid, interest will be chargeable on the balance outstanding.

For the purposes of calculating and charging interest, the balance will be deemed to have been payable on a day which is 6 months prior to the final day for making a return under section 77(2)(b).

(4) Interest is also charged on arrears of tax that have been established by means of either estimates or assessments made under sections 110 and 111. In both cases, interest culatedis calfrom the date on which the amount becomes payable and is chargeable at a daily rate of 0.0274% for the time during which the amount remains unpaid.

  • Paragraph (a) provides that tax recoverable by means of an estimate issued under section 110 is regarded as falling due for the taxable period to which the notice of the estimate relates.
  • Paragraph (b) provides that tax recoverable by means of an assessment issued under section 111 is regarded as falling due for the taxable period (or later/latest taxable periods if there is more than one) to which the notice of the assessment relates. This applies irrespective of whether a notice of appeal under the section has been received.

Relevant Date: Finance Act 2019