Changes in HMRC's interest rates

As a result of recent market movement, HMRC have published their revised interest rates on direct taxes, indirect taxes and national insurance contributions paid late and overpaid applicable from 6th November 2008.


The revised interest rates are based on the average base lending rate of 4.5 per cent, calculated in accordance with the relevant Regulations. Coincidentally, the date these rates became applicable is the same day the the Bank of England cut their base rate a further 1.5% to 3%! So will there be more cuts to come? We will keep you informed.


Income tax, national insurance contributions, capital gains tax, stamp duties
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 7.5 per cent to 6.5 per cent.
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) changes from 3.00 per cent to 2.25 per cent.


Petroleum revenue tax, advance corporation tax
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 changes from 5.75 per cent to 5.0 per cent.


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


Inheritance tax
The rate of interest for late payments or repayments of inheritance tax, capital transfer tax and estate duty changes from 4.0 per cent to 3.0 per cent.


Corporation tax
The rate of interest for either late payments or repayment of corporation tax for accounting periods ended on or before 30 September 1993 (pre CT [pay and file]), changes from 5.75 per cent to 5.0 per cent.


The rate of interest charged on unpaid corporation tax for accounting periods ending on or after 1 October 1993 (under CT [pay and file]) changes from 6.0 per cent to 5.0 per cent.
The rate of interest paid on overpaid corporation tax for accounting periods ending on or after 1 October 1993 (under CT [pay and file]) changes from 2.75 per cent to 2.0 per cent.
The rate of interest on unpaid corporation tax for accounting periods ending on or after 1 July 1999 (other than underpaid CT instalments) changes from 7.5 per cent to 6.5 per cent.
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, changes from 4.0 per cent to 3.0 per cent.


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 7.5 per cent to 6.5 per cent.
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 4.0 per cent to 3.0 per cent.
Section 178 of the Finance Act 1989 and the Taxes (Interest Rate) Regulations 1989 (S.I. 1989/1297) lay down the procedures and formulae for calculating and amending HM Revenue & Customs interest rates that apply to direct taxes, and national insurance contributions.
Section 197 Finance Act 1996 rate and the Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations 1998 (S.I. 1998/1461) lay down the procedures and formulae for calculating and amending HM Revenue & Customs interest rates that apply to indirect taxes.
Section 37 Tax Credits Act 2002 and the Tax Credits (Interest Rate) Regulations 2003 (SI 2003/123) lay down the procedures and formula for calculating and amending interest on an overpayment of a Tax Credit in cases of fraud, neglect on penalties charged.
By Sally Richards