Value Added Tax Act 1994 section 78

Interest in certain cases of official error

Section 78 requires HMRC to pay interest to taxpayers in cases where an official error has led to the taxpayer overpaying VAT, missing out on input tax credit, paying VAT that was not due, or experiencing a delay in receiving a VAT-related payment.

• HMRC must pay interest where a taxpayer has overpaid output tax, failed to claim input tax credit, paid VAT not due, or suffered delayed VAT-related payments — but only on amounts that are the subject of a valid claim
• The interest period generally runs from the date the error originated (or the payment was received by HMRC) to the date HMRC authorise the repayment, with the rate set under section 197 of the Finance Act 1996
• Any delay caused by the claimant's own conduct — such as unreasonably late claims, failure to provide information promptly, or claiming amounts not due — is excluded from the interest calculation
• Claims must be made in writing within four years of the end of the applicable interest period, and no interest is payable on amounts already increased by a repayment supplement under section 79