Finance Bill Tracking Service 2010 | Budget 2010


Who is likely to be affected?

1. Taxpayers that make late payments to HM Revenue & Customs (HMRC) or receive repayments from HMRC of corporation tax (CT) or petroleum revenue tax (PRT).

General description of the measure

2. This measure will bring CT and PRT within the harmonised interest regime introduced in the Finance Act (FA) 2009. The harmonised interest regime will apply to all late payments and repayments of taxes and duties administered by HMRC.

3. The Government intends to legislate this measure in a Finance Bill to be introduced as soon as possible in the next Parliament.

Operative date

4. Implementation of interest harmonisation requires changes to a number of HMRC computer and operational systems and is to be phased in over a number of years. The new provisions will be brought into effect by Treasury Orders which will specify the dates from which they have effect.

Current law and proposed revisions

5. The current primary legislation applying interest to CT is in section 87A of the Taxes Management Act 1970 and in section 826 of the Income and Corporation Taxes Act 1988. The current primary legislation applying interest to PRT is in Schedule 2 to the Oil Taxation Act 1975. The harmonised regime is contained in sections 101 to 105 of FA 2009 and this legislation is being amended to encompass CT and PRT.

6. The current rules on interest have evolved over time with additions and adaptations applied as each major tax has been reviewed or each new tax or duty has been introduced. As such, there are a number of different rules applying for interest across the taxes and duties. For some taxes, interest is charged as soon as payment is late; for others it is only charged where under-declarations are assessed, and for some liabilities there is no late payment interest charged at all. In addition, where repayment interest currently applies it may be called a supplement, credit interest or statutory interest.

7. The new harmonised interest provisions replace the current range of differing regimes with a single legislative framework for interest chargeable on late payments and payable on repayments which will apply to all taxes and duties administered by HMRC. Interest will be charged from the date the tax or duty was due to be paid to HMRC until the date it is paid. HMRC will pay interest on repayments from the date the tax or duty was due to be paid or, if later, the date the payment was actually received, to the date the repayment is made.

8. The interest descriptors particular to the current Acts for each tax and duty will be simplified and unified for all taxes and duties to become late payment interest and repayment interest. The rules for Quarterly Instalment Payments remain unchanged and do not form part of the harmonised rules that will apply to CT. This treatment reflects the particular nature of these payments and responds to representations made during earlier consultation.

9. Customs duties are subject to EU Regulation and as such are outside the scope of the harmonised interest regime. Although administered by HMRC, tax credits and child benefits are not taxes and as such are not covered by this harmonised regime.

Further advice

10. This measure was the subject of consultation in June 2008, November 2008 and December 2009. A summary of the responses to the December 2009 consultation Interest - Working Towards a Harmonised Regime has been published today on the HMRC website.

11. The Review of HMRC's Powers, Deterrents and Safeguards website will provide updates on the implementation timetable for each tax and duty.

12. If you have any questions about this change, please contact Don Morley on 020 7147 2407 (email: Information about Budget measures is available on the HM Revenue & Customs website at