CH146060 - Interest: Repayment Interest: General rule - examples
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.
Repayment of amounts paid to HMRC (ITSA)
Russell made the following two payments on account for his 2014-15 self-assessment. The payments were based on his liability for the previous year.
- |
Due date |
Amount |
Date paid |
Amount paid |
|---|---|---|---|---|
Payment on account |
31 January 2015 |
£15,000 |
28 January 2015 |
£15,000 |
Payment on account |
31 July 2015 |
£15,000 |
27 July 2015 |
£15,000 |
When Russell submitted his self-assessment for 2014-15 his actual liability for the year was £24,000. According to the allocation of payments rule, see CH146100, the amount we refund comes, in two equal parts, from the two payments on account. We refunded the overpayment of £6,000 on 1 March 2016.
The repayment interest that we pay is based on the information below.
Amount on which repayment interest is payable |
Period for which repayment interest is paid |
|---|---|
£3,000 |
31 January 2015 to 1 March 2016 |
£3,000 |
31 July 2015 to 1 March 2016 |
Here, Russell paid the payments on account a few days early, but the repayment interest start dates are the dates on which the amounts were due and payable.
Payment of amounts not paid to HMRC (VAT repayment return)
Eduardo is required to submit a monthly VAT return for the period ending 30 September 2023 by 7 November 2023. Eduardo submits the return on 1 November 2023, and this shows a VAT credit of £10,000.
HMRC paid Eduardo £10,000 on 10 November 2023.
Eduardo is entitled to repayment interest from the repayment interest start date until the date the repayment was made.
The repayment interest start date, where the amount has not been paid to HMRC but becomes payable by HMRC because of a return or a claim, is the later of:
- the date when the return was required to be filed
- the date when the return was filed
In this example the repayment interest start date is 7 November 2023 which was the date the return was required to be filed.
Eduardo will be paid repayment interest on the £10,000 VAT credit for 3 days from 7 November 2023 until 10 November 2023 i.e., 8 November to 10 November inclusive.
Repayment of amount paid to HMRC and payment of amount not paid to HMRC
Marco is required to submit a quarterly VAT return for the period ending 31 August 2023 by 7 October 2023. Marco files this return and pays his VAT liability of £30,000 on 5 October 2023.
On 6 December 2023 Marco discovers two errors on the same return and sends an error correction to HMRC. This shows that Marco over accounted for £20,000 output tax and deducted £15,000 less input tax than he had been entitled to. This means that his correct position is a repayment of £5,000 instead of the payment of £30,000 that was on his return. HMRC pays the net difference of £35,000 owed to Marco on 13 December 2023.
Of the £35,000 paid to Marco, £30,000 was in respect of an amount that he had overpaid to HMRC, so Rule 1 applies (CH140000). Repayment interest is paid in respect of the £30,000 from the repayment interest start date of 7 October 2023 (the date the amount became due and payable to HMRC). He is therefore paid repayment interest for 67 days from 8 October 2023 to 13 December 2023, inclusive.
The remaining £5,000 that HMRC paid to Marco was an amount that he had not paid to HMRC but was due as a result of his claim, so Rule 2 applies. Repayment interest is paid in respect of the £5,000 from the repayment interest start date of 6 December 2023 (the date when the claim was made). He is therefore paid repayment interest for 7 days from 7 December 2023 to 13 December 2023, inclusive.