• Print this page

The measure

The rules which govern the interest payable on tax paid late to HMRC and the interest credited by HMRC where tax is over paid are to be changed. Until now there have been anomalies so that for some taxes, interest has been charged as soon as payment is late, whereas for others it is only charged where under declarations are assessed. In addition, where repayment interest currently applies it may be called a supplement, credit interest or statutory interest, and may apply at a number of different rates depending on the tax.

Legislation will be introduced in Finance Bill 2009 to create a harmonised interest regime for the first time for all taxes and duties administered by HMRC with the exception of CT and PRT. The measures include:

• That a single rate of simple interest will be paid by HMRC on overpayments across all taxes, duties and penalties, other than Quarterly Instalment Payments (QIPs) for corporation tax.
• That a single rate of simple interest charged by HMRC across all taxes, duties, and penalties that are paid late to HMRC, other than QIPs for corporation tax.

Who will be affected?

All taxpayers.                                                                               

When?

Implementation of interest harmonisation requires changes to HMRC's computer systems and is to be staged over a number of years. For those taxes where HMRC currently charge and pay interest, rates will be aligned by Treasury Order and will have effect shortly after the date that Finance Bill 2009 receives Royal Assent. Interest on late payments of in year PAYE is expected to be introduced, using a risk based approach, from April 2010. The new provisions will be brought into effect by Treasury Orders which will specify the dates from which they have effect.