VDIM2010 | The law and legal powers: The law supporting default interest

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.

The relevant law is contained in Section 74 of the VAT Act 1994. Discretion to assess interest can be found in Section 76 of the Act, and time limits for assessing can be found in Section 77 of the Act.

The legislation covering the applicable rate of interest payable to HMRC is contained in Regulation 4 (1)(c) of the Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations 1998. See VDIM5010 for guidance on rates of interest.