WIREDGOV

A new minimum interest rate on tax repayments of 0.5% means that in future interest will still be payable even when the Bank of England base rate falls below 1.5% HM Revenue & Customs (HMRC) announced today.

The Government will also be introducing changes to the current interest rates regime which will deliver greater transparency and certainty in the way that rates are set and applied. This will pave the way for the implementation of full interest harmonisation which was legislated for in this year’s Finance Bill.

Details

The Government announced in Budget 2009 that it would introduce secondary legislation designed to harmonise interest rates for those taxes where HMRC currently charge and pay interest. These regulations came into effect on 22 July 2009 and introduce changes to the way that HMRC calculates its interest rates.

HMRC will recalculate its rates after the September Monetary Policy Meeting (MPC) using the new formulae provided in the regulations. Harmonisation will result in a change to some of HMRC’s interest rates even if there is no change in the base rate announced by the MPC.

The harmonised rates will be based around the Bank of England base rate and will change in response to any changes announced by the Monetary Policy Committee 13 working days later.

Notes to Editors

1. Interest charged on late payments of tax will be the Bank of England base rate plus 2.5 and for interest paid on overpayments, the rate will be the Bank of England base rate minus 1.

2. The new rates and the minimum repayment rate take effect 13 working days after the September meeting of the Bank of England Monetary Policy Committee.

3. Any change in the interest rates will be announced in a press release and published on HMRC’s website.

4. The number of formulae used by HMRC to calculate its interest rates has reduced and it is therefore necessary to recalculate the rates for the various taxes and duties using the formulae shown in the regulation.

5. The new rates will come into effect on the date announced and will apply until there is a change in the base rate and it becomes necessary for HMRC to recalculate its rates again. The rates applied for all earlier periods by HMRC will apply as notified. The new rates will not be retrospective.

Issued by HM Revenue & Customs Press Office

Press enquiries only please contact:

Contacts:

Madonna Grant
Phone: 020 7147 2331
madonna.grant@hmrc.gsi.gov.uk