VDIM8030 - How to inhibit, amend or withdraw interest: Inhibiting or withdrawing interest on an assessment

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.

During the making of an assessment a “1” should be put in the interest inhibit box of the VAT641 or VAT642 for each under declared line on which interest is to be inhibited.

Inhibits are not usually needed on over declaration lines because the VAT Mainframe does not recognise them. To confirm the desired result has been achieved, the taxpayer’s account on VISION can be examined to establish the resultant debit or credit.

If however the over-declaration is subject to a payment of statutory interest under sections 78 or 85A VAT it should be inhibited for default interest purposes. This is so that if an officers assessment is raised separately for the same accounting period the taxpayer will not benefit twice, through payment of statutory interest and a reduction in any associated default interest.

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

Local managers should agree the appropriate level of countersignature for the inhibit. See also over declarations and statutory interest at VDIM4030.

Interest should not be inhibited on an assessment if the case is pursued for fraud, neither should it be inhibited because of any delay by HMRC.

Setting the inhibit signal because there has been delay by HMRC means the taxpayer will receive no assessment of interest at all, this is wrong. All you should be trying to do is reduce the period over which interest has been charged, see guidance VDIM5020 on the Interest Span.