Interst

In: Business and Management

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Tolley® Exam Training

UK CORPORATION TAX CHAPTER 10

CHAPTER 10
INTEREST ON LATE PAID TAX AND REPAYMENTS
This chapter looks at interest and in particular it covers:
– interest on late paid tax and repayments;
– the effect of losses carried back.
In this chapter both FY 2013 and FY 2014 rates will apply

10.1

Introduction
Interest runs from the due date for payment to the actual date of payment of the tax where corporation tax is paid late. FA 2009, Sch 53
So, if tax due on 31 March 2015 is paid on 1 April 2015, interest runs from 31 March to 1 April and is charged for one day, as the payment was one day late.
This applies to all payments of corporation tax – whether the company pays by instalments or not. So small companies, which are required to pay their tax 9 months and 1 day after the end of the chargeable accounting period, will also be charged interest where they pay that tax late.
HMRC charges interest at an interest rate calculated as bank base rate plus 2.5%.
The current rate is 3%.
Repayments of overpaid tax receive repayment interest at an interest rate calculated as bank base rate minus 1%, with a minimum rate of 0.5%. The current rate is 0.5%. FA 2009, Sch 54

10.2

Interest on instalments
Problems are experienced particularly by larger companies, as tax due by instalments is based on the tax liability of the current year, yet the payments are made during the year. A company will therefore have the problem of estimating its tax bill, which could well change during the year, so what it pays may not reflect its actual liability. If it does not pay enough, interest on overdue tax will run.
If it pays too much, it will get repayment interest.
The rates of interest that apply to instalments are more generous. Interest is charged at base rate plus 1%, currently 1.5%.
Repayment interest is given at base rate minus 0.25%…...

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