When can interest be charged on VAT errors?

Interest can be charged on VAT errors when HMRC raises an assessment for underpaid VAT. This is because HMRC has a protocol for managing tax compliance, and when they identify a shortfall in VAT that needs to be rectified, they will issue an assessment. Stakeholders are expected to pay the correct amount of tax due, and when an assessment indicates that there has been an underpayment, HMRC has the authority to charge interest on the amount of VAT that was not paid on time. This interest serves as a penalty for not remitting the proper tax amount, ensuring that the tax system remains fair and that all taxpayers honor their obligations in a timely manner.

The other options do not lead to the automatic charging of interest. For instance, while a taxpayer can voluntarily disclose a large error, this action alone does not trigger interest unless it leads to an assessment by HMRC. Also, mutual agreement between HMRC and the taxpayer regarding a correction does not inherently imply that interest will apply. Lastly, if a taxpayer takes more than 30 days to correct an error, it might be a factor to consider, but interest specifically arises from HMRC's assessment, making that the defining moment for interest to be charged.