Why is HMRC holding our restaurant group's VAT refund?
Because the return claims money back rather than pays it, and HMRC checks a share of those before releasing the cash. A repayment return stands out when the figure is large, when it is the first one, or when the pattern changes, and a restaurant group is prone to all three: a fit out quarter, a new site opening, a run of zero rated food purchases against quieter sales. None of that means you have done anything wrong. It means HMRC wants to see the records behind the number before it pays.
The instinct when the money is late is to phone, or to file the next return and hope the balance clears. Neither moves a verification check along. What moves it is handing HMRC the evidence it asked for, in the form it asked for, so a caseworker can tick the claim off. For a London restaurant group that lives on specialist hospitality accounting, that is a document exercise, not a negotiation.
What is a VAT repayment verification check, and why did we get one?
A verification check is HMRC looking at the return before it pays, rather than paying first and reviewing later. You normally learn about it from a letter or email carrying a reference that starts CFS, CFSS or CFSRP, asking you to send records through an online form. It is routine for repayment returns and is not the same as a full compliance investigation, though an unanswered one can turn into a wider enquiry.
HMRC can ask for this evidence because the right to reclaim input tax depends on holding the right records, and it is allowed to make reasonable enquiries before repaying. The VAT returns and Making Tax Digital rules in VAT Notice 700 set out what a valid claim looks like and the four year window for recovering input tax, so a check is really HMRC asking you to show the return meets those rules.
What evidence does HMRC actually ask for to release the refund?
The core list is short and the same most times: your detailed VAT account, your ten highest value purchase invoices where VAT was charged, and copies of your original bank statements for the period. On top of that, HMRC asks for whatever matches the claim, which is where a restaurant group has more moving parts than a single shop. The GOV.UK form for sending repayment claim details lists the full set, and it maps onto a restaurant group like this.
The repayment evidence checklist, mapped to a two site restaurant group.
| What HMRC asks for | What it looks like for a restaurant group | Where it should already live |
|---|---|---|
| Detailed VAT account | Output and input tax per site, tied to the box figures on the return | Your bookkeeping software VAT return backup |
| Ten highest value purchase invoices | Fit out, kitchen equipment, EPOS, rent with VAT, drinks suppliers | Purchase ledger, with the supplier VAT numbers shown |
| Original bank statements | Statements showing the supplier payments actually left the account | Bank feed export for the VAT period |
| First return pre registration costs | Stock and equipment bought before the group registered | A stock and asset schedule with dated invoices |
| Property and fit out evidence | Completion statement or lease, builder invoices, planning references | The project file for the new site |
| Non standard rate sales invoices | The hot and cold food split, delivery platform VAT, any zero rated lines | EPOS reports reconciled to the sales day book |
Send the pack as HMRC structures it, one period per submission. Scattered PDFs with no VAT account to tie them together are what turns a seven day review into a seven week one.
Which of these does a two site restaurant group usually struggle to produce?
Rarely the invoices. It is the detailed VAT account and the reconciliation behind it. A group running two EPOS tills, a couple of delivery platforms and a drinks account often has the raw data but has never tied it into one VAT account that matches the boxes on the return. HMRC asks for that account first, and when it does not reconcile to the bank the caseworker has every reason to keep the money until it does.
The hot and cold food split is the other common gap. Eat in food is standard rated, most cold takeaway food is zero rated, and the mix changes the input tax picture, so a claim that ignores the split invites questions. The catering and takeaway food VAT rules in Notice 709/1 decide which is which, and a group that sells both needs its EPOS reports to show the division cleanly.
How do we send the evidence, and how long will HMRC take?
You send it through the online form on GOV.UK, signing in with the same details you used to register for VAT, or your agent does it under their authorisation. You upload the documents inside the form, and if the claim spans more than one period you complete a separate form for each. Once HMRC has what it asked for, it aims to review within seven working days, so the release date is set far more by how complete your first submission is than by how often you chase.
The practical rule is to answer everything in one go. A partial pack buys a second request and another wait, because the caseworker cannot sign off a claim with a hole in it. If a document genuinely does not exist, say so and explain why, rather than leaving a silence HMRC has to chase.
Does HMRC pay us interest while it holds our refund?
Yes, but not enough to make waiting comfortable. For accounting periods starting on or after 1 January 2023 you earn repayment interest on money HMRC holds, as confirmed in Notice 700. As at November 2026 the rate is 2.75 percent a year, set at the Bank of England base rate of 3.75 percent minus one percent, and a rate decision is due on 5 November 2026 that could move it. On a 40,000 pound refund held three months that comes to about 275 pounds.
That figure is the point, not the comfort. A few hundred pounds of interest rarely covers what the missing cash costs a restaurant group that still has to pay rent, staff and suppliers on time. The money is better in your account than earning 2.75 percent in HMRC's, which is the real argument for getting the evidence right the first time rather than drip feeding it.
Who does what when a repayment is held.
| Handling a held VAT refund | In house or DIY | Generic accountant | LOYALS specialist |
|---|---|---|---|
| Reads the CFS letter and lists the exact evidence wanted | ✗ | ● | ✓ Line by line |
| Rebuilds the detailed VAT account and ties it to the bank | ✗ | ● Extra fees | ✓ Included |
| Handles the hot and cold food split and delivery platform VAT | ✗ | ✗ Often missed | ✓ Built in |
| Submits once through the official form and chases release | ● | ● | ✓ One submission |
| Open Mon to Sat if HMRC calls back with a query | ✗ | ✗ Mon to Fri 9 to 5 | ✓ 10am to 7pm Mon to Sat |
This is why a group whose refund is stuck moves from a generic accountant to a specialist who assembles the pack the way HMRC reads it.
What this typically costs at LOYALS
- Multi-site hospitality finance, including VAT and the repayment pack: from £1,295 to £1,795 a month
- Structure and Tax Review, if the group needs its VAT and entity set up checked: from £750 one-off, credited against your first month
All fees exclude VAT and are fixed for twelve months. Quotes are issued in writing within 24 hours after a 15-minute call, and we do not take on ongoing work below £500 a month. See full price list.
What should we do now to get the repayment released?
Start with the letter, not the return. Find the CFS reference and the exact list of what HMRC wants, then pull the detailed VAT account and reconcile it to the bank for the period before you send anything. Gather the ten highest value invoices, add the evidence that matches your claim, whether that is a fit out, a pre registration stock schedule or the food split, and submit it all through the form in one pass. Resist refiling the return unless you find a real error, in which case correct it through the VAT error correction process in Notice 700/45 rather than the next return.
If the VAT account does not tie to the bank, or the food split has never been set up properly, that is the work to fix first, because it is what a check exposes. LOYALS is a King's Cross firm of accountants and business consultants that runs VAT and repayment work for restaurant groups across London, and if your refund is stuck we can read the letter with you, build the pack HMRC asked for, and get the claim into the form in one go. The next step is to book a 15-minute call so we can tell you what the letter is really asking for.