VSIM6300 - For what period is statutory interest due: unreasonable delay

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.

VSIM6200, explains that VATA section 78 (8) provides for any delay in authorising the payment of statutory interest (SI) caused by the conduct of the person claiming the SI to be taken into account when determining the applicable period for payment of SI. VATA section 78 (8A) (a) to (c) defines this as including in particular any period referable to:

• Any unreasonable delay in making a claim for SI or a claim for a repayment on which SI is claimed
• Any failure by the claimant or person acting on their behalf to provide all the necessary information to validate both claims, either at the time of submission or in response to a subsequent request by HMRC
• As part of the SI or repayment claims the inclusion of something the claimant is not entitled to

Subsection (9) clarifies the period to be taken in to account when referring to the provision of further information requested by HMRC, see VSIM6500.

One important point to note is that although we want taxpayers to make claims promptly, we cannot lay down any hard and fast rules for the submission of claims other than the legal 4 year time limits.

This means we cannot insist on submission of a claim for the principal amount within say six months of discovery of the official error because this would have no legal basis. It would therefore be extremely rare to deduct a period for unreasonable delay in submitting a claim when calculating the applicable period but you should contact Tax Administration, Litigation and Advice (TALA) for further advice if necessary, see VSIM1400.

For example: A taxpayer discovered in November 2011 that he had over-declared output tax in periods 12/10 to 09/11 due to an official error. We could not insist on a claim for repayment being made within 6 months of discovery because he legitimately has until January 2015 before any of the accounting periods are out of time to claim.

Despite the fact the taxpayer would have known for four years that he could have submitted a claim for repayment it would be extremely difficult to allege unreasonable delay, when determining the applicable period for SI, because of what appears to be conflicting legislation. Although not yet tested it is likely that a tribunal would decide in the taxpayers favour.

For example: HMRC issues a Revenue and Customs Brief following a Court ruling which went in the taxpayers favour and invited claims for refund of output tax over-declared for the preceding four years. Again HMRC cannot stipulate that claims must be submitted within 6 months but in this situation it is beneficial to the taxpayer to submit a claim as soon as possible before earlier periods go ‘out of time’. The onus is therefore on the taxpayer but the longer they leave it the less accounting periods can be included in the repayment claim for the SI calculation, although the SI end date will be later for any remaining claim.

However where appropriate it may be possible to take account of any period of delay by the claimant in providing further information. VSIM6400 covers failure to provide information and VSIM6500 where a claim consists of something the taxpayer is not entitled to claim.

VATA s 78 (8) and (8A)