What Interest Rates Apply for late VAT Payment to HMRC?

HMRC interest on either VAT arrears or overpaid VAT is charged at 2.75%. Following a 30-day period, further interest is charged on the VAT due from the date of the notice for a period of up to two years.

In what Situations will VAT Interest be Charged?

  • If you either report less VAT than you have charged, or claim more than you have paid.
  • If you pay a ‘VAT notice of assessment of tax’ which HMRC later discovers is too low.
  • If you inform HMRC that more is owed them due to a mistake on your return.

Is Late Payment VAT Interest tax Deductible?

HMRC prohibits any deduction of interest charges when working out your taxable profits

Can I Claim if HMRC has Made a VAT Mistake Themselves?

If you’ve repaid too much because of your own error, you will be unlikely to get it repaid but, where HMRC has clearly made an error, 0.5% interest is claimable for the whole period from when the tax was overpaid or reclaimed.

VAT Defaults and Surcharges

When either your VAT return or full payment for VAT Due isn’t received by the deadline, HMRC records a default. If you default, you will likely enter what is called a 12-month surcharge period during which further default will extend this for an additional year. The term ‘surcharge’ refers to a possible payment that would be levied on top of the VAT already owed. 

For corporation tax debt and failed payments of PAYE, we can advise in situations of insolvency. Please get in touch as soon as you can to get confidential advice for your company.

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