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HMRC Changes Internal Interest Rates

by Robert Lee, Tax-News.com, London

24 December 2008


HMRC has released details of changes to its internal interest rates on direct and indirect taxes, and late-payment and overpayments of national insurance contributions; the rates, effective from January 6, 2009, are in response to fluctuations in market rates.

Yesterday legislation was put in place to enable HM Revenue & Customs to change its interest rates faster, following a movement in market rates. From 7th January 2009 most rates will change thirteen working days after the meeting of the Monetary Policy Committee of the Bank of England. Under previous legislation it took around a month to change most of the rates.

According to figures provided by 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 changes from 5.5% to 4.5%.

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 will change from 1.5% to 0.75%.

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 October 13 1999 paid late or overpaid changes from 4.25% to 3.5%.

Late payment of income tax on company payments that became due on or after October 14 1999 will be charged at the interest rate of 4.5%, a rise of 1% on last year.

The rate of interest for late payments or repayments of inheritance tax, capital transfer tax and estate duty changes from 3.0% to 2.0%.

Regarding interest rates on corporation tax:

The rate of interest for either late payments or repayment of corporation tax changes from 4.25% to 3.5%.

The rate of interest paid on overpaid corporation tax for accounting periods ending on or after October 1 1993 (under CT (pay and file)) changes from 1.25% to 0.5%.

The rate of interest on unpaid corporation tax for accounting periods ending on or after July 1 1999 (other than underpaid CT instalments) changes from 5.5% to 4.5%.

The rate of interest on overpaid corporation tax for accounting periods ending after July 1 1999, in respect of periods after the normal due date, changes from 2.0% to 1.0%.

Regarding customs duty, environmental levies and tax, excise duties, insurance premium tax and VAT;

The rate of default interest charged on:

  • underdeclared VAT, air passenger duty, insurance premium tax, landfill tax, climate change levy, aggregates levy;
  • excessive repayments of VAT, insurance premium tax, land fill tax, climate change levy, aggregates levy and customs duties recovered by assessment ; and
  • late payment of customs duty;

changes from 5.5% to 4.5%.

The rate of statutory interest paid:

  • where an official error has caused an overpayment, a failure to claim credit, or a delay in certain repayments of VAT, insurance premium tax, land fill tax, climate change levy, aggregates levy and excise duties; or
  • where there has been undue delay in processing a claim for repayment of excise duty and customs duty.

changes from 2.0% to 1.0%.


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