Finance Act 2021

Section 120

SCHEDULE 29 Late payment interest and repayment interest: VAT

1 FA 2009 is amended as follows.

2 In section 102(4) (repayment interest on sums to be paid by HMRC)—

(a) omit the “and” at the end of paragraph (a);

(b) after paragraph (a) insert—

“(aa) Part 2A makes special provision as to the period for which an amount of VAT credit carries interest, and”.

3 (1) Schedule 54 (repayment interest) is amended as follows.

(2) In Part 2, after paragraph 12B insert—

“VAT payments on account

12C (1) This paragraph applies in the case of a repayment of the amount by which—

(a) the total amount of payments on account made in respect of a prescribed accounting period, exceeds

(b) the amount of VAT payable in respect of that accounting period.

(2) The repayment interest start date is the date on which the VAT return for the prescribed accounting period is due.

(3) In this paragraph—

• “payment on account” means a payment on account required under section 28 of VATA 1994;

• “prescribed accounting period” has the same meaning as in VATA 1994;

• “VAT return” means a return required to be made by regulations under VATA 1994.”

(3) After Part 2 insert—

“PART 2A VAT: special provision as to period for which amount carries interest

12D In this Part of this Schedule—

• “prescribed accounting period” has the same meaning as in VATA 1994;

• “relevant VAT return” means the VAT return for the prescribed accounting period to which the VAT credit relates;

• “VAT credit” has the same meaning as in VATA 1994;

• “VAT return” means a return required to be made by regulations under VATA 1994.

12E (1) An amount of VAT credit does not carry interest for any period during which—

(a) a VAT return required to be made on or before the date on which the relevant VAT return is made has not been made, or

(b) there is a failure to comply with a requirement imposed under paragraph 4(1) or (1A) of Schedule 11 to VATA 1994 (production of evidence and giving of security).

(2) The period referred to in sub-paragraph (1)(b)—

(a) begins on the date when written notice requiring production of evidence or the giving of security is given by HMRC, and

(b) ends on the date when HMRC receive the required evidence or the required security.”

4 (1) Schedule 54A (further provision as to late payment interest and repayment interest) is amended as follows.

(2) After the Schedule heading insert—

“PART 1

CORPORATION TAX”

(so that the existing text of the Schedule becomes Part 1 of the Schedule).

(3) At the end of the Schedule insert—

“PART 2 Value added tax

Interpretation

5 In this Part of this Schedule—

• “assessment” has the same meaning as in paragraph 3 of Schedule 53;

• “prescribed accounting period” has the same meaning as in VATA 1994;

• “VAT credit” has the same meaning as in VATA 1994.

Certain amounts of repayment interest recoverable as late payment interest

6 Where each of conditions A to C is met, an amount of repayment interest that—

(a) has been paid to a person, but

(b) ought not to have been paid (see condition C),

may be recovered from the person as if it were late payment interest.

7(1) Condition A is that repayment interest has been paid to the person on a VAT credit for a prescribed accounting period.

(2) Condition B is that (whether or not a previous assessment has been made), an assessment or amendment of an assessment is made of the amount of value added tax payable by the person for that prescribed accounting period.

(3) Condition C is that as a result of the assessment or amendment of an assessment, it appears to HMRC that some or all of the repayment interest ought not to have been paid.

Common period rules for value added tax

8 (1) This paragraph applies where there is a common period in relation to a person (see sub-paragraph (2)).

(2) A common period in relation to a person is any period during which—

(a) an amount of value added tax that carries late payment interest is due and payable by the person (“the overdue payment”), and

(b) an amount of VAT credit that carries repayment interest is payable to the person (“the VAT credit”).

(3) During the common period—

(a) the overdue payment is to be treated as carrying late payment interest only on the amount (if any) by which the overdue payment exceeds the VAT credit, and

(b) the VAT credit is to be treated as carrying repayment interest only on the amount (if any) by which the VAT credit exceeds the overdue payment.”