Compensation to end for delayed VAT refunds

The proposed scrapping of compensation for delays to the payment of VAT refunds by HMRC is unfair and likely to harm the cash flows of businesses affected according to the Chartered Institute of Taxation.

If a business submits a VAT return claiming a repayment but HMRC does not process it within 30 days the taxpayer may be entitled to a supplement of 5% of the amount of the reclaim. But HMRC is planning to remove the repayment supplement and pay simple interest (0.5%) instead.

Alan McLintock chair of the CIOT indirect taxes sub-committee said: ‘Under this proposal if a repayment return is correct but HMRC undertakes lengthy enquiries for say six months the business will have its repayment paid six months late but receive no interest or recompense. As VAT is an inherent part of a business’s cash flow these...