VDIM4010 - Calculating Liability: Confirming the liability

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.

There are four steps to follow when considering whether interest should apply. These steps should be followed before you process any assessment and at the review stage of any formal or informal appeal. It is important in any appeal case that you can show proper consideration has been given at each step.

• Confirming the liability - Although there is a liability to interest on most assessed tax, normally we would only charge it where it would represent commercial restitution, see VDIM3000.
• Calculating the liability - If a liability exists it should be quantified, see VDIM7000.
• Raising an assessment - HMRC has discretion whether or not to assess any interest. Generally where there is no VAT loss to the Exchequer we will not assess interest, see VDIM8000. There may be other rare cases where it is also appropriate not to assess. In exercising this discretion you must

• maintain equity in the application of interest
• take full account of the circumstances of the particular case, and
• bear in mind the fundamental objective of interest is to provide commercial restitution.

• Notifying the assessment - Where an assessment is made it must be notified to the taxpayer. Normally this will be on a VAT 655 or VAT 657 Officer’s Assessment output document, see VDIM10010.