VDIM5040 - Calculation of interest: The end date

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.

Although section 74(1) says that interest is due from the reckonable date until payment, for ease of administration HMRC charges interest up to the day before the calculation date (this is said to be the date the tax assessment is made).

The end date is therefore the day before the calculation date, see VDIM5050.

The taxpayer is also given 30 days from the date of issue of the tax assessment to pay the tax due (or further interest is charged). It is therefore very important that both the OA calculation and issue dates are correct.

If after processing the VAT 641/642 you find that either are incorrect and as a result the taxpayer has been charged too much interest, you will need to take prompt corrective action using the VAT 663 procedures, see VDIM6000.