VDIM10010 - Notices: Notifying the taxpayer

This guidance deals with interest matters in respect of prescribed accounting periods starting on or before 31 December 2022. Interest matters with effect from 01 January 2023 are dealt with under Finance Act 2009.

Please see Compliance Handbook page CH140000 onwards to find the new interest rules guidance.

Notification of Interest

Interest is notified to taxpayers on the Notice of Assessment (VAT655), see guidance VAEC8600, or Notice of Error correction (VAT657) guidance, see VAEC8800. If a taxpayer asks for an explanation of how the interest has been calculated, this should be sent to them by the assessing officer without delay. See VDIM12020 for guidance on the correct way to supply this information in appeal cases.

In some instances however a separate notification by letter may be made to a taxpayer.

Notification of further interest

Further interest is notified direct to taxpayers on the Notice of Assessment of Further Interest letters (VAT658 or VAT659). See VDIM10020 and VDIM10030 for information on the content of these documents and guidance on their use.

Notification of amendment or withdrawal of interest

VAT643 input

If interest is recalculated or cancelled as a result of VAT643 action, the “Interest” box on the Form VAT656 Notice of Amendment of Assessment will be updated automatically. The new amount shown will replace the interest notified on the original assessment and include any further interest previously notified to the taxpayer. It will also include any further interest which may have become due from the date of the amendment. As there is no such thing as negative interest it can never appear in the “due from HMRC” column.

VAT644 input

If the whole of a tax assessment is withdrawn a letter should be sent to the taxpayer together with any output documents which are produced (see guidance VAEC9200 VAT Assessment & Error Correction). You should make sure that the taxpayer is told in the letter that any interest which may have originally applied to the assessment is no longer due.

VAT915 appropriation action

Where remittance appropriation action has been taken and the computer interest calculation suite has been updated, any further interest recalculation will be notified automatically on the Form VAT658 or VAT659.

VAT663 action taken

Where VAT663 action has been taken, see VDIM5100 the computer will not notify the amendment of interest automatically. The D16586 print showing interest amendments is produced and you will need to advise the taxpayer in writing.