CH146460 - Interest: repayment interest: special provisions for VAT: requirement to give security as a condition of releasing a VAT credit - example

You must check whether, and from which date, the FA 2009 interest rules apply to the tax or duty you are dealing with. See CH140160 for full details.

Arun is due a VAT credit of £100,000 on his VAT return for the period ending 30 June 2023. This return was due on 7 August 2023 and Arun submitted it early, on 5 August 2023.

HMRC gave Arun a Notice of Requirement to give security on 12 August 2023. On receiving the Notice of Requirement, Arun was required to provide the security immediately. HMRC received the required security from Arun on 21 August 2023.

HMRC paid the VAT credit of £100,000 on 25 August 2023.

If Arun had not been required to provide a security, repayment interest would apply from the repayment interest start date of 7 August 2023 (when the return was due) to 25 August 2023 (when the VAT credit was paid). However, Paragraphs 12E(1)(b) and 12E(2) of Schedule 54 to the FA2009 provide that, where there is a failure to comply with a Notice of Requirement to give a security, repayment interest is not paid for the period from the date of the notice until the security is received.

Therefore repayment interest is not due for the period from and including 12 August (which is the day the notice requiring the security was given) up to but not including 21 August 2023 (the day before the security was received by HMRC).

This means repayment interest will be paid

• for 4 days from the repayment interest start date of 7 August until the date the notice of requirement to give security was given on 12 August (8 August to 11 August inclusive), plus
• for 9 days from 21 August to 25 August inclusive