HMRC Cuts Interest Rates

by Robert Lee, Tax-News.com, London

17 February 2009

Interest rates charged on late payments and paid on overpayments are to be cut, the UK tax authority, HM Revenue and Customs (HMRC) confirmed on February 16, 2009.

The reduced rates that cover quarterly instalment payments and early payments of corporation tax not due by instalments (for accounting periods ending on or after July 1, 1999) take effect from February 16, 2009.

The rates covering late payments and overpayments of all other direct taxes, indirect taxes and National Insurance contributions remain unchanged this month.

The rate of interest charged on underpaid instalment payments of corporation tax changes from 2.5% to 2.0%. The rate of interest on overpaid instalment payments of corporation tax, and on corporation tax paid early (but not due by instalments) changes from 1.25% to 0.75%.

Section 178 of the Finance Act 1989 and the Taxes (Interest Rate) Regulations 1989 lay down the procedures and formulae for calculating and amending HM Revenue and Customs interest rates that apply to direct taxes, and national insurance contributions.

The revised interest rates are based on the average base lending rate of 1%, calculated in accordance with the relevant Regulations.

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