HMRC Announces Interest Rate Changes

by Jason Gorringe, Tax-News.com, London

30 August 2006

HM Revenue and Customs last week unveiled new rates of interest on direct and indirect taxes and national insurance contributions paid late and overpaid.

The new rates of interest, which take effect from 6 September 2006, have been put in place as a result of the recent movement in market rates.

According to HMRC, the rate of interest charged on income tax, national insurance contributions, capital gains tax, stamp duty, stamp duty land tax and stamp duty reserve tax paid late, tax credits overpayments in cases of fraud, neglect and on penalties charged, and on tax charged by an assessment for the purpose of making good to the Crown a loss of tax wholly or partly attributable to failure or error by the taxpayer, will change from 6.5% to 7.5%.

The rate of interest on overpaid income tax, national insurance contributions, capital gains tax, stamp duty, stamp duty land tax and stamp duty reserve tax (repayment supplement) will change from 2.25% to 3%.

The rate of interest for development land tax, petroleum revenue tax (including supplementary petroleum duty and advance petroleum revenue tax), and on advance corporation tax and income tax on company payments which became due on or before 13 October 1999 paid late or overpaid will change from 5% to 5.75%.

The rate of interest on late payment of income tax on company payments which became due on or after 14 October 1999 also changes from 6.5% to 7.5%.

Other key features of the interest rate changes included:

• The rate of interest for late payment or repayments of inheritance tax, capital transfer tax and estate duty changed from 3% to 4%;
• The rate of interest for either late payment or repayment of corporation tax for accounting periods ended on or before 30 September 1993 (pre CT (pay and file)), changed from 5% to 5.75%;
• The rate of interest charged on unpaid corporation tax for accounting periods ending on or after 1 October 1993 (under CT (pay and file)) changed from 5.25% to 6%;
• The rate of interest paid on overpaid corporation tax for accounting periods ending on or after 1 October 1993 (under CT (pay and file)) changed from 2% to 2.75%;
• The rate of interest on unpaid corporation tax for accounting periods ending on or after 1 July 1999 (other than underpaid CT instalments) changed from 6.5% to 7.5%; and
• The rate of interest on overpaid corporation tax for accounting periods ending after 1 July 1999, in respect of periods after the normal due date, changed from 3% to 4%.

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