CH146480 | Interest: repayment interest: special provisions for VAT: common period rule for VAT - example

You must check whether, and from which date, the FA 2009 interest rules apply to the tax or duty you are dealing with. See CH140160 for full details.

Michelle’s monthly VAT return for January 2023 is due on 7 March 2023. She submits a repayment return on 1 March 2023; this gives rise to a VAT credit of £10,000. HMRC carries out checks prior to making the repayment and as a result does not pay the £10,000 until 23 June 2023. The repayment interest start date is 7 March 2023, as this is the later of when the return was due and when it was submitted. The repayment interest end date is 23 June 2023. Therefore, repayment interest would normally be calculated on the £10,000 from 8 March 2023 to 23 June 2023, inclusive.

Michelle’s VAT return for April 2023 showed that she owed £4,000. The payment was due on 7 June 2023, but she did not pay it until 14 June 2023. As a result, Late Payment Interest will apply. This would normally be calculated on the late payment of £4,000 from 8 June to 14 June 2023, inclusive.

Because the periods for late payment interest and repayment interest overlap, this is a “common period”. During the common period, repayment interest is paid on the net amount, rather than late payment interest and repayment interest being calculated separately. As a result, the overall interest position would be:

• Repayment interest from 8 March 2023 to 7 June 2023 (inclusive) on £10,000.

• Repayment interest from 8 June 2023 to 14 June 2023 (inclusive) on the net amount of £6,000. No late payment interest.

• Repayment interest from 15 June to 23 June 2023 on £10,000.

FA09/SCH54A/PARA8