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This paragraph covers the assessment of interest under the default interest regime applying to VAT periods starting before 1 January 2023.

From 1 January 2023 the harmonised interest regime for late payment of tax in FA 2009 applies in relation to VAT (including any VAT penalties assessed)¹. This harmonised interest regime is covered in V5.302D.

HMRC may assess the amount due by way of interest and notify it to the person concerned². The discretion afforded to HMRC by the use of the word 'may' is generally exercised by the waiving of interest where it does not represent 'commercial restitution', ie where no tax has been lost, or its collection delayed, as a result of the default³.

Interest is paid without deduction of income tax⁴.

Interest is assessed by reference to the prescribed accounting period in respect of which the tax or amount assessed as tax was due⁵. If the tax by reference to which interest is calculated cannot readily be