Treatment of VAT repayment returns and supplements (VAT Notice 700/58)
How HMRC deals with VAT repayment returns and what happens when there’s a delay in a repayment.
This notice explains supplements for accounting periods starting on or before 31 December 2022.
From 1 January 2023, there are different rules dealt with under the Finance Act 2009. New rules are explained in VAT penalties and interest guidance.
1. Overview
This notice explains:
- how HMRC processes your VAT repayment claims
- what will happen if we’re late in making a repayment
- your rights of appeal
2. The VAT repayment return process
2.1 What happens when you submit a repayment return
Once you have completed and submitted your repayment return it will go through the following process.
Step 1
HMRC’s computer system will record the date you submit your return through your online account. If you have been approved to submit paper returns the date we receive your return will be recorded on the computer system.
Step 2
Automated credibility checks - these tests are applied to all claims. The majority of returns pass these tests and proceed immediately for payment.
Step 3
Credibility queries - returns that fail the automated tests are checked manually and are either resolved by the credibility team, or sent to specialist officers that deal with VAT for further investigation.
Step 4
Returns sent for further checks - high priority is given to these checks and any queries are answered with the minimum involvement or inconvenience to your business. If we need to visit you, we will arrange it for a mutually convenient date and time.
Step 5
Credibility queries returned to the credibility team - results of VAT officer action, including amendments, are returned with a certificate detailing the amount of time taken and any official delay. Claims are passed for payment.
Step 6
Payment of the claim - once a claim has been accepted, repayment is made by direct payment to your bank. Our computer checks whether repayment supplement is applicable and if it is, the supplement is paid automatically at the same time as your repayment. You can find further information about repayment supplement in section 3.
3. Repayment supplement
3.1 What a repayment supplement is
Repayment supplement is a form of compensation paid in certain circumstances when we do not authorise payment of a legitimate claim within 30 net days of receipt of the VAT Return. You can find further information about net days in paragraph 3.2.
Normally, the 30-day repayment supplement clock will start on the day that a return is received. But, if your return is received before the end of the accounting period, the clock will not start until the end of the period. This is because you are not entitled to any input tax claimed on the return until the end of an accounting period, so it would be unfair if the 30-day clock started before then.
3.2 What we mean by ‘net days’
When we calculate the time taken to authorise your payment, the law allows HMRC to deduct the time taken to:
- make reasonable enquiries to be satisfied that your claim is legitimate and accurate
- correct errors or omissions on your return
After we have made allowable deductions, you will qualify for repayment supplement if:
- there are still more than 30 days between the date of receipt of your return and the date we authorise repayment
- the conditions mentioned in paragraph 3.3 are met
A explains how we calculate net days.
How to calculate net days
Process table showing how to calculate net days.
| Process | Repayment supplement clock |
|---|---|
| Claim return is received at the VAT Central Unit | 30 day clock starts* |
| Information keyed and accounts updated for each VAT registration | |
| Any errors or omissions must be corrected first. Automated credibility tests (all claims). Test failures or queries (only some claims) | The clock will stop while any errors or omissions on the return are corrected |
| Manual checks by credibility staff | |
| If necessary the query will be sent to a local office that deals with VAT | |
| Local knowledge or information used to resolve query | |
| Clock stops | |
| If necessary, first contact is made with business, usually followed by a visit | The clock may restart during this period if we delay unduly in resolving the query |
| Action after the visit | |
| Receipt of claim and query back to credibility staff | |
| Further scrutiny | |
| Re-input of payment and other information | Clock restarts |
| Authorisation of payment | Clock stops |
| If the total time in the shaded areas is more than 30 days and all qualifying conditions are met (paragraph 3.3), repayment supplement will be paid | |
| *but the clock cannot start before the end of the prescribed accounting period |
3.3 The conditions to qualify for repayment supplement
You will not qualify for repayment supplement if any of the following apply:
- your return is received late
- at the time your return is received, you have returns missing for earlier periods
- you have made errors on the return which, when corrected, reduce the net tax claimed by more than 5% or £250, whichever is the greater
You will be asked to repay a supplement if such errors on your return are discovered after repayment supplement has been paid.
3.4 How repayment supplement is paid
If all the qualifying conditions are met, we will pay repayment supplement automatically at the same time as payment of your return is authorised.
This is calculated on the greater of either:
- 5% of the amount claimed on your return
- £50
However, we may make an extra ex-gratia payment to make good any serious disadvantage suffered if your repayment is delayed to an exceptional extent, and the repayment supplement is less than the interest which you might otherwise have earned.
3.5 What to do if you think you should have received repayment supplement
As explained in paragraph 3.4, repayment supplement should be paid to you automatically if applicable.
However, if you think there’s been undue delay in paying your claim and repayment supplement has not been paid, you can ask for an explanation.
Contact the VAT: general enquiries helpline for more information.
We will examine all the circumstances relating to the payment of your claim including the deduction of any reasonable enquiry time, and will either:
- authorise a repayment supplement if appropriate
- write to you and explain why a supplement has not been paid
4. Appeals
4.1 Disagreeing with HMRC’s decision
If you disagree with our decision not to pay repayment supplement please write to us within 30 days of our decision, giving your reasons, for example if you have further information or you think we have missed something.
You also have the right to:
- have a review of your case by an officer not previously involved in the matter - if you want a review you need to write to us within 30 days of the date of the decision
- appeal to an independent tribunal - you must write to the Tribunals Service within 30 days of our decision
If you opt for a review you will still be able to appeal to the tribunal if you disagree with the outcome. You do not have to write to us yourself. An accountant or adviser can do this on your behalf.
More information on reviews and appeals is available in factsheet HMRC1: HM Revenue and Customs decisions - what to do if you disagree and in the guidance Disagree with a tax decision.
You can find information on how to appeal to a tribunal or you can contact them on Telephone: 0300 123 1024.
Your rights and obligations
Read the HMRC Charter to find out what you can expect from us and what we expect from you.
Help us improve this notice
If you have any feedback about this notice please write to:
HM Revenue and Customs
Tax Administration and Litigation Advice Team
8th Floor Imperial Court
2-24 Exchange Street East
Liverpool
L2 3PQ
You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.
If you need general help with this notice or have another VAT question you should phone our VAT helpline or make a VAT enquiry online.
Putting things right
If you are unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.
If you’re still unhappy, find out how to complain to HMRC.
How HMRC uses your information
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Updates to this page
Last updated 6 January 2023 + show all updates
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Link added to new interest rules for accounting periods starting on or after 1 January 2023.
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First published.