Interest ― repayment interest on VAT credits or overpayments

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note examines repayment interest payable by HMRC for VAT periods starting on or after 1 January 2023.

Repayment interest ― the basics

Repayment interest is broadly payable on VAT (and VAT penalties) which is owed by HMRC in relation to VAT periods starting on or after 1 January 2023. The repayment interest replaces the ‘repayment supplement’ which applies in relation to earlier periods.

Interest is calculated from a ‘repayment interest start date’ until HMRC repays the VAT or sets it off against a different amount. The start date will depend on the circumstances and in particular whether the amount in question has already paid to HMRC or represents a credit owed to the taxpayer.

Certain periods are left out when calculating interest, such as periods where a business has outstanding VAT returns which have not been submitted by their due dates.

The rate of repayment interest is paid at the Bank of England base rate minus 1%, with a minimum rate of 0.5%.

When repayment interest

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