The old adage warns against scrutinizing a gift horse’s mouth, yet it’s evident that numerous businesses and charitable organizations are grappling with a challenge in reconciling their VAT accounts. This predicament arises after submitting a VAT return that prompts HMRC to issue a VAT repayment.
Beginning this year, HMRC initiated a Repayment Interest procedure, which entails the addition of repayment interest to payments if they are delayed in refunding taxpayers. This has caused confusion among taxpayers and, as the audit season advances, even their auditors find themselves perplexed.
Curiously, HMRC does not provide any notifications regarding the Repayment Interest value, and it doesn’t seem to be reflected in taxpayers’ Digital VAT Accounts. Consequently, the question of how to substantiate the disparity between the requested refund and the actual received amount, especially if it’s larger, arises.
We are aware that HMRC is actively addressing this absence in the audit trail and plans to issue a letter from October 2023 displaying the interest amount. Additionally, the Repayment Interest value will become visible in the Digital Tax Account. However, a specific commencement date for this change is still pending.
While not precisely a “gift” that we enthusiastically embrace, it does serve as a form of commercial compensation for the delays resulting from HMRC’s administrative challenges.
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Should concerns arise regarding VAT-related technicalities or accounting procedures, please don’t hesitate to speak to our Indirect Tax team on 0330 124 7740 or complete the form below.