Interest on tax underpaid

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Interest on tax underpaid
  • When is interest charged?
  • How much interest will be charged?
  • How can I mitigate the interest due?

Interest on tax underpaid is a compulsory charge set out in tax legislation to reflect the interest which would have accrued to the Exchequer had the correct amount of tax been paid.

The Finance Act 2009 introduced a new harmonised regime in respect of interest for the late payment of tax to apply across all taxes, with the exception of corporation tax, from April 2010. The rules apply a single rate of simple interest on late payments.

FA 2009, s 101 and Sch 53
When is interest charged?

The Taxes Management Act 1970 provides that tax 'shall carry interest' at the late payment rate from the late payment interest start date until the date of payment. As a result, there is an automatic charge to interest applied on any tax paid late.

A charge to interest can therefore arise in respect of:

    More on Corporation tax administration: