Repayment Supplement when HMRC repay VAT late

Repayment Supplement when HMRC Repay VAT Late

When HMRC delays the repayment of VAT, they are required to provide a 5% supplement on the amount owed. This is a statutory obligation that exists to compensate businesses for the cost of being deprived of funds they are entitled to.

HMRC has 30 days to repay VAT unless they are conducting reasonable enquiries into the claim. If HMRC is actively investigating the return, the 30-day clock pauses during the period of active investigation. The clock resumes when the enquiries cease or when questions posed to the taxpayer have been answered.

In practice, many HMRC officers overlook this requirement entirely. They may not be aware of the supplement provisions, or they may simply fail to apply them even when the repayment has clearly been delayed beyond the permitted timeframe.

Taxpayers who believe their VAT repayment has been delayed should contact HMRC directly to request the supplement. When doing so, HMRC is obliged to provide a detailed time accounting showing when enquiries were opened, what questions were asked, when responses were received, and how the 30-day period has been calculated.

Where there is a disagreement between the taxpayer and HMRC about whether the supplement is due, or about the amount of the supplement, the matter can be escalated to the Tax Tribunal for determination. Businesses should not simply accept HMRC’s refusal to pay the supplement without exploring their options.