VATRS10100 - About repayment supplement

It is important that you refer all requests for repayment supplement to the Repayment Supplement Team.

This guidance deals with repayment supplement 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 CH140000 onwards to find the new interest rules guidance.

The law – S79 VATA 1994

Why does HMRC pay repayment supplement?

Repayment supplement is a form of compensation paid subject to certain conditions if HMRC does not issue a written instruction to pay a return or claim within 30 days of the receipt of the VAT return or claim.

HMRC has a collective responsibility over the verifying of repayment returns and claims within 30 days; it is not the responsibility of any individual.

Does repayment supplement need to be claimed?

No. We pay it automatically if it becomes due. If you receive a claim, forward it to the Repayment Supplement Team.

Under what circumstances do we pay repayment supplement?

We will pay repayment supplement if we take more than 30 calendar days to issue the written instruction to make the payment or refund relating to

  • a valid repayment return, or
  • a claim by certain bodies allowable under sections 33, 33A, 33B and 33C VAT Act 1994

so long as

  • we receive the return or claim on time, and
  • the amount shown on the return or claim as due by way of payment doesn’t exceed the actual payment or refund due by more than 5% or £250 whichever is the greater.

Repayment supplement does not apply to delays in making other refunds such as claims made through error correction notifications, V426/427 claims or claims for statutory interest.

What starts and stops the 30 day repayment supplement clock?

The clock starts on the later of

  • the day we receive the return or claim, and
  • the day after the end of the prescribed accounting period to which the return or claim relates (a business is not entitled to the input tax claimed until after the end of the period).

If there are earlier missing returns the clock will not start until they are submitted.

However, the clock is stopped if we

  • raise enquiries and consider responses, or
  • correct errors, or
  • have to amend trader details.

But we must carry out those actions efficiently. The clock starts again when we have completed those actions.

The clock finally stops on the day we issue the written instruction VOPS240 to make the payment or refund.

Why might we enquire?

The credibility of all VAT returns is of critical importance and provided we carry out reasonable and justified enquiries relating to a claim in an efficient way there should be no liability to pay repayment supplement. It is entirely proper that we withhold repayments where we need time to confirm entitlement.

What is the date of first contact in an enquiry?

First contact with the trader begins the enquiry time and the repayment supplement clock stops only when it is reasonable for HMRC to expect the customer to have received our request for additional information

  • 2 working days after sending your letter
  • the day of your telephone call or email if you make it before 5pm that day
  • the day after your call or email if you make it after 5pm that day.

What is reasonable enquiry time?

Reasonable enquiry time is the time needed to carry out an enquiry efficiently. You must therefore take all reasonable steps to avoid delay while carrying out your enquiry. So, after receipt of a return or claim, it is critical that you

  • issue your enquiry quickly and say clearly what your enquiry is,
  • set a 14 day target for the trader to reply,
  • reconsider the case if you have no reply within the time you have set,
  • make further contact within 2 days of reconsidering,
  • examine and consider any reply or information promptly, and
  • end your enquiry when you are satisfied you have a complete answer.

When is a written instruction to make the payment or refund made?

The written instruction is made when the VOPS240 is issued and this finally stops the clock. This is the critical date for repayment supplement, not when the repayment is actually made. The issue of the VOPS240 is triggered by the approval of the claim in the TRUCE system by the counter-signing officer.

How much repayment supplement do we pay?

The amount we pay is 5% of the net amount claimed, or £50, whichever is the greater.

How do we give repayment supplement?

Once the number of days deductible has been recorded in the VAT Mainframe, and a repayment is authorised, the payment of repayment supplement is automatically calculated and credited to the customer account.

Repayment supplement for

  • a repayment return is paid at the same time as the VAT credit it relates to.
  • a claim made under sections 33, 33A, 33B or 33C VATA 1994 is refunded.

Can we set repayment supplement off against other debts?

Yes. We may set it off against a trader’s outstanding debt to VAT, penalty, interest, surcharge or direct tax debts (commonly PAYE and Corporation Tax). Any decision to set off must be made quickly and any discussion about whether it is right to set repayment supplement off against a debt must be documented, as the time taken for the setoff process is not deductible.

Can our refusal to pay repayment supplement be appealed?

Yes for a repayment return – you must send any appeal to the Repayment Supplement Team.

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

Can we recover repayment supplement paid in error or reduce a repayment supplement claim?

Yes. The Repayment Supplement Team does both of these.

What if the trader says the amount is insufficient to compensate them?

They can apply for an additional ex-gratia payment through the complaints procedure.

What to do if you need more guidance or a ‘how to’ guide

Title of guidance page Link to page
Who do we pay repayment supplement to? VATRS10210
What starts and stops the 30 day clock? VATRS10220
Time allowed for enquiries, correcting errors and amending details VATRS10230
Records to keep VATRS10240
How is repayment supplement paid? VATRS10250
Appeals against refusal to pay repayment supplement VATRS10260
Reconsideration, reduction and recovery VATRS10270
Trader says amount is insufficient VATRS10280
How to work pre-credibility checks to avoid repayment supplement VATRS10300
How to deal with situations affecting reasonable enquiry time VATRS10400

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