VAT repayment supplement

Repayment supplement was a payment HMRC had to add to a VAT repayment when it took more than 30 days to issue the written instruction to repay a return that was sent on time and broadly correct. It was the greater of 5% of the amount due or £50, and the 30 days did not count time spent on reasonable enquiries or correcting errors. It applies only to accounting periods starting on or before 31 December 2022; later periods attract repayment interest instead.

Does repayment supplement still apply?

Only to older periods. Section 79 of the Value Added Tax Act 1994, which created the supplement, has been omitted by SI 2022/1298, made under the Finance Act 2009 interest rules. HMRC guidance says that for accounting periods starting on or after 1 January 2023 repayment interest replaces the supplement, and VAT Notice 700/58 now states that it explains supplements only for accounting periods starting on or before 31 December 2022.

The rules are still worth knowing because a repayment for a 2022 period can still be in dispute, under enquiry or the subject of an appeal. If you are dealing with a return for a period that started in 2023 or later, read the section below on what replaced the supplement and the page on HMRC repayment times and repayment interest.

When did HMRC have to pay the supplement?

Section 79(1) applied where a person was entitled to a VAT credit on a return, or where certain registered bodies were entitled to a refund under sections 33, 33A, 33B or 33C (for example local authorities, museums and galleries, academies and certain charities). Section 79(2) then set three conditions:

• the return or claim was received by HMRC no later than the last day on which it was due;
• HMRC did not issue a written instruction directing the payment within the relevant period of 30 days; and
• the amount claimed did not exceed the amount actually due by more than 5% of the correct figure or £250, whichever was greater.

Notice 700/58 adds that you did not qualify if, when the return was received, you had returns missing for earlier periods, and that HMRC would ask for a supplement back if errors of that size were found after it had been paid. HMRC’s VAT Repayment Supplement Manual (VATRS10100) also confirms that the supplement did not apply to delays on other refunds, such as claims made through error correction notifications.

How was the 30 day period counted?

Section 79(2A) defined the relevant period as 30 days beginning with the later of the day after the last day of the accounting period and the date HMRC received the return. So a return filed before the period ended could not start the clock early, because you are not entitled to the input tax until the period is over.

The days were calendar days. VATRS10230 confirms that enquiry time includes weekends and public holidays. The clock stopped when HMRC issued its written instruction to pay, not when the money reached your bank. HMRC’s manual (VATRS10220) records that tribunals have accepted the internal payment authority, form VOPS240, as that written instruction.

Which periods were left out of the count?

Section 79(3) allowed regulations to exclude certain time, and regulation 198 of the Value Added Tax Regulations 1995 did so. Four kinds of period were left out of account:

1. the raising and answering of any reasonable inquiry about the return or claim;
2. HMRC’s correction of errors or omissions in the return or claim;
3. for a VAT credit, any continuing failure to submit returns, as referred to in section 25(5); and
4. for a VAT credit, time spent complying with a condition under paragraph 4(1) of Schedule 11, such as producing documents or giving security.

Regulation 199 fixed how long each excluded period lasted. An inquiry period ran from the date HMRC first raised the inquiry to the date it received a complete answer. An error period ran from when the error first came to HMRC’s notice until HMRC corrected it. A documents or security period ran from service of HMRC’s written notice until the documents or security arrived.

HMRC’s own guidance set limits on what counted as reasonable. Under VATRS10230, first contact by letter stopped the clock two working days after the letter was sent, and a phone call or email stopped it the same day if made before 5pm. A message left with someone other than the authorised person did not count. Officers were expected to set a deadline of no more than 14 days for a reply, and if a visit could not take place within 7 days of first contact because of HMRC workloads, the extra days were treated as HMRC delay and kept running on the clock. HMRC also excluded time spent amending registered details such as a new bank account, while accepting in VATRS10230 that this exclusion is not in section 79 itself.

How much was the supplement and how was it paid?

Section 79(1) set the supplement at 5% of the amount due or £50, whichever was greater. HMRC paid it automatically with the repayment, so no claim was needed. VATRS10250 notes that HMRC could set the supplement off against other VAT, penalty, interest or direct tax debts. Where the delay was exceptional and the supplement fell short of the interest you could have earned, Notice 700/58 says HMRC might make an extra ex gratia payment, and VATRS10100 points traders to the complaints procedure for this.

What does a worked example look like?

Illustration only. A business files its quarterly return for the period ending 30 September 2022 on 15 October 2022, before the deadline, claiming a repayment of £8,000. The clock starts on 15 October because that is later than 1 October. HMRC raises a query on day 20 and receives a complete answer 12 days later, so those 12 days are left out. The written instruction to pay is issued on day 45.

Step	Days
Calendar days from start to written instruction	45
Less reasonable inquiry time	12
Net days	33

Net days exceed 30, so a supplement of 5% of £8,000, which is £400, is due. Had the claim been £600, 5% would be £30, so the £50 minimum would apply instead. Had the return overstated the repayment by more than the greater of 5% or £250, no supplement would be due at all.

What replaced it from 1 January 2023?

For periods starting on or after 1 January 2023, HMRC pays repayment interest rather than a flat supplement. Where the VAT has not been paid to HMRC, for example a credit on a repayment return, interest runs from the day after the later of the return’s due date and the date you submitted it, until HMRC repays or sets the amount off. The rate is the Bank of England base rate minus 1%, with a minimum of 0.5%. HMRC’s published table shows 2.75% from 9 January 2026.

Two conditions echo the old rules. If you have overdue returns, interest on a repayment return starts only when HMRC receives the last overdue return. If HMRC asks for security and you do not pay it, no interest runs from the date of the notice until the security is paid. The practical difference is size: interest at a few per cent a year for a short delay is usually far smaller than the old 5% or £50 minimum.

How do you challenge a refusal to pay the supplement?

Notice 700/58 says that if you think there has been undue delay and no supplement was paid, you can ask HMRC for an explanation through the VAT helpline. HMRC will either authorise the supplement or explain why it is not due. If you disagree with the decision you can write to HMRC within 30 days, ask for a review by an officer not previously involved within 30 days, or appeal to the tribunal within 30 days of the decision.

A review or appeal usually turns on the record of enquiry dates. Keep copies of letters, call notes and the dates you supplied information, because the dispute is often about whether HMRC’s enquiry time was reasonable or whether some of it was HMRC delay.

What mistakes do people make?

• Expecting a supplement on a 2023 or later period. Only repayment interest is available there.
• Counting to the date the money arrived rather than the date HMRC issued its written instruction.
• Overlooking missing earlier returns, which prevented the clock starting under HMRC’s guidance.
• Treating every day of an enquiry as HMRC’s fault. Time waiting for your reply was excluded, while HMRC’s own delays were not.
• Claiming a supplement on a separate error correction claim, which VATRS10100 says is outside the scheme. See correcting VAT errors for how those claims work, and why a VAT repayment is delayed for the checks HMRC runs today.

Any supplement or interest can also be absorbed by HMRC’s power of set off against other debts, so check your account for other liabilities before chasing a payment. For current deadlines that affect entitlement, see VAT return and payment deadlines.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

• The four year cap on VAT claims
• Penalties for errors on VAT returns
• How to clear VAT penalty points
• VAT late payment penalties and interest
• Time of supply: VAT tax points
• Unjust enrichment and VAT repayment claims

Sources

• legislation.gov.uk: Act 1994 c. 23, section 79
• GOV.UK: Repayment interest on vat credits or overpayments
• GOV.UK: Treatment of vat repayment returns and supplements notice 70058
• legislation.gov.uk: Act 1994 c. 23, section 79
• GOV.UK: Manual page VATRS10100
• GOV.UK: Manual page VATRS10220
• GOV.UK: Manual page VATRS10230
• legislation.gov.uk: SI 1995/2518, regulation 198
• legislation.gov.uk: SI 1995/2518, regulation 199
• GOV.UK: Manual page VATRS10250

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.