When a taxpayer reclaims VAT from HMRC, the taxpayer can expect to receive payment from HMRC within a statutory timeframe: 30 days, with certain exclusions (e.g. periods of enquiry by HMRC). If the payment is not received within this timeframe, a “repayment supplement” (currently 5% of the repayment amount) is payable by HMRC to the taxpayer.
However, this repayment supplement is only payable by HMRC under certain conditions. For example, Section 79(2)(a), VAT Act 1994 requires a “requisite return or claim” to be submitted. Does this refer to a formal “VAT return”, or could claims by other means also be permitted?
In Our Communications Ltd v Revenue & Customs Commissioners ( UKFTT 604 (TC), published on 9 October 2012), the taxpayer had submitted its VAT return to HMRC in good time. Shortly afterwards it realised it had made an error and submitted an additional £1.5m claim to HMRC via letter.
HMRC was late in paying this additional claim, but argued that only claims via formal VAT returns gave entitlement to repayment supplements. As the additional £1.5m claim had been made by letter, HMRC concluded that the additional claim was not subject to a repayment supplement.
However, the Tribunal examined various parts of the VAT legislation and HMRC’s own directions in the public notices, and concluded that “it is neither necessary nor correct to restrict [repayment supplements] to VAT credits claimed in a return”.
Taxpayers should therefore be entitled to receive a 5% repayment supplement in respect of valid claims, even if the VAT claim was sent to HMRC separately from the formal VAT return.