Commentary

A4.629 Interest on overpaid tax and tax paid early—overview

Administration and compliance

A4.629 Interest on overpaid tax and tax paid early—overview

Interest on overpaid tax and tax paid early

A4.629 Interest on overpaid tax and tax paid early—overview

Harmonised repayment interest regime

HMRC inherited from the former Inland Revenue and Customs & Excise a number of different regimes for interest paid out on overpayments. FA 2009 created a harmonised interest regime for all taxes and duties administered by HMRC.

Where a person is owed a repayment of tax by HMRC, broadly speaking repayment interest will be paid from the due date for payment of the original liability (or date of payment if later), to the date of repayment (including set-off)1. The repayment interest is simple interest (not compound)2. For HMRC guidance on the harmonised interest regime, see CH140000.

Repayment interest is not taxable for income tax purposes, but is taxable for corporation tax purposes (as a non-trading loan relationship credit, see D1.743)3.

The interest rate setting regulations were also amended with effect from 12 August 2009 to4:

  1.  

    •     harmonise the formulae used for calculation of interest charged across all taxes and duties for which HMRC are responsible

  2.  

    •     introduce a minimum repayment interest rate of 0.5%, and

  3.  

    •     ensure that the determination of

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