HMRC will not incur any interest cost on money owed

Announcement will speed up changes following a movement in market rates

HM Revenue & Customs (HMRC) have announced that they will not incur any interest cost on money owed to people who have overpaid tax, despite charging an interest rate for those who owe HMRC.

The reduced rates that cover quarterly instalment payments and early payments of corporation tax not due by instalments (for accounting periods ending on or after
1 July 1999) took effect from 19 January 2009.

The reduced rates that cover all other direct and indirect taxes and national insurance contributions paid late and overpaid took effect from 27 January 2009. These rates of interest are the first announced since legislation was amended in December 2008 to allow HMRC to more quickly change there rates following a movement in market rates. The amended legislation provides for these rates to come into effect thirteen working days after the meeting of the Monetary Policy Committee of the Bank of England. Previously it took around a month to change these rates. The amendment to the legislation also included confirmation that HMRC interest rates will not fall below zero.

Rate changes

All the rates changed on 27 January 2009 except where otherwise stipulated.

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 4.5 per cent to 3.5 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 0.75 per cent to 0 per cent.

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 3.5 per cent to 2.75 per cent.

The rate of interest on late payment of income tax on company payments which became due on or after 14 October 1999 changes from 4.5 per cent to 3.5 per cent.
The rate of interest for late payments or repayments of inheritance tax, capital transfer tax and estate duty changes from 2 per cent to 1 per cent.

The rate of interest charged on underpaid instalment payments of corporation tax (CT) changes from 3 per cent to 2.5 per cent. This rate took effect from 19 January 2009.

The rate of interest on overpaid instalment payments of corporation tax, and on corporation tax paid early (but not due by instalments) changes from 1.75 per cent to 1.25 per cent. This rate took effect from 19 January 2009.

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 3.5 per cent to 2.75 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 3.5 per cent to 2.75 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 0.5 per cent to 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 4.5 per cent to 3.5 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 1 per cent to 0 per cent.

Customs duty, environmental levies and tax, excise duties, insurance premium tax and VAT

The rate of default interest charged on:

• under declared 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
• late payment of customs duty
• Changes from 4.5 per cent to 3.5 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
• where there has been undue delay in processing a claim for repayment of excise duty and customs duty
• Changes from 1 per cent to 0 per cent.