VDIM2080 - The law and legal powers: The 2 year time limit to assess further interest

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.

If the tax remains unpaid Section 76(7) allows further assessments to interest to be made, however these assessments are also subject to the two year time limit in section 77(2) of the VAT Act 1994 (see VDIM2070), that is, two years from the date the amount of VAT due for the prescribed accounting period concerned has been finally determined. This allows the further interest assessments to be issued up until the end of this two year period if the tax remains unpaid.

If the assessment is subject to local review or appeal, the tax cannot be considered to be finally determined until the outcome of such a process. This view was supported by Mr Demack in the case of Sirpal Trading (MAN/92/37).

The date when the amount of VAT due for the prescribed accounting period concerned has been finally determined is therefore the later of the following:

• the calculation date of the officer’s assessment, or
• the date of any amendment to that officer’s assessment, or
• the date of release of a tribunal decision or a judgment of the court being delivered, such decision or judgment becoming the final act of adjudication in the case, or
• the date any appeal against the assessment is withdrawn, or
• the date of any agreement made under section 85 of the VAT Act 1994.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)