Default interest
The tax creates interest on tax under certain circumstances:
- Return is an estimate for the amount of tax already charged for the return period (which includes errors disclosed voluntarily).
- A person fails to state his obligation for registration and estimates more than three months for tax recovery.
- Invoice to include VAT issued by a person who is not authorized to issue a tax invoice
An assessment has a duration of more than three months, and the HMRC is required to divide it by the return period. This is necessary to establish the period for which interest is to charge. Generally, interest accrues from the due date for submission of returns for the relevant period. However, the maximum period is three years. However, the interest will continue on the unpaid valuation after thirty days from the date of issue of interest. The interest rate determines by the Treasury and is broadly in line with commercial interest rates.