105. Interest on refunds of tax

Summary

This section provides for Revenue to pay interest on refunds of VAT to a claimant in two circumstances. These are where:

• there is a mistaken assumption in the operation of the tax made by Revenue, or
• there is a delay of more than 93 days (3 months) in processing a fully completed claim.

The rate of interest is 0.011% per day.

Details

(1) The terms “claimant”, “overpaid amount”, “refundable amount” and “valid claim” are defined for the purposes of this section.

(2) Where a mistaken assumption in the operation of the tax is made by Revenue, which results in a refundable amount of VAT being due to a claimant, interest on that amount is payable to the taxpayer.

“Mistaken assumption in the operation of the tax” cover situations where there is a reinterpretation of an existing provision. This could arise, for example, from a decision by the Appeal Commissioners, by a domestic court or by the European Court of Justice. It could also arise from a change in interpretation made by Revenue.

Where a mistaken assumption in the operation of the tax is made, the interest is calculated from—

• (2)(a) in the case of an overpaid amount, from the date of receipt of that amount, and
• (2)(b) in the case of any other refundable amount, either from:

(i) the 19^th of the month following the taxable period in which the claimant would have been entitled to receive the amount, or

(ii) where a VAT return is required, from the date of its receipt,

to the date the amount is paid by Revenue.

(3) Subsection (3) covers cases of administrative delays. It obliges Revenue to pay interest if a VAT repayment has not been made after the expiry of 93 days from the date of receipt of a valid claim for repayment. The claimant must provide Revenue with whatever details or records they request to validate the claim.

Interest will be paid from the date of expiry of the 93 days up to the date the repayment is made, excluding the time correspondence is ongoing with the accountable person concerning the claim. Note that the provision does not cover simple arithmetical errors or cases where Revenue withholds a refund pending the filing of an outstanding tax return by the taxpayer.

(4) Simple interest is calculated from the date on which the amount becomes payable and is chargeable at a rate of 0.011% per day, or part of a day, during which the amount remains unpaid. This rate can be changed by Ministerial Order. (Note that interest is chargeable at the rate of 0.0274% per day in respect of VAT underpaid by an accountable person – see section 114.)

(5) Interest will not be paid where it amounts to less than €10.

(6) Revenue can only pay interest on VAT repayments in accordance with the terms of this section.

Also, the section will not apply in cases where any interest is payable (on a refund of tax). This is because, under section 941 of the Taxes Consolidation Act 1997 interest will become a mandatory part of the payment to be awarded by the Courts in certain circumstances.

(7) The Minister for Finance may make orders prescribing the rate of interest which is payable under this section. These are subject to the usual procedural rules.

(8) Revenue may make regulations relating to the operation of this section.

Relevant Date: Finance Act 2020