Amendment to interest provisions for late payment, repayment and penalties
Published 29 October 2018
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This publication is available at https://www.gov.uk/government/publications/changes-to-interest-provisions-for-late-payment-repayment-and-penalties/amendment-to-interest-provisions-for-late-payment-repayment-and-penalties
Who is likely to be affected
This measure clarifies existing interest provisions to ensure they apply as intended and it affects persons paying interest late or receiving repayments where the taxes are:
- Corporation Tax
- Diverted Profit Tax
- Inheritance Tax
- Stamp Duty
- Stamp Duty Land Tax (SDLT)
- interest on penalties under PAYE
General description of the measure
This measure clarifies the detail of how interest is applied to late payments for Corporation Tax, Stamp Duty and SDLT and to penalties imposed for failure to comply with obligations under PAYE.
It also clarifies and confirms the basis for interest calculations in respect of Diverted Profit Tax and repayment interest by HMRC, and ensures that the 2009 interest provisions apply in relation to penalties charged under the Promoters of Tax Avoidance Schemes (POTAS) legislation.
Policy objective
To clarify existing interest provisions to ensure they apply as intended across several tax regimes.
Background to the measure
This measure was announced by Written Ministerial Statement on 19 July 2018 and the subsequent extension to include PAYE penalties was announced at Budget 2018. No consultation was conducted.
It clarifies existing legislation, restoring the law to the position currently used and understood.
Detailed proposal
Operative date
From Royal Assent of the Finance Bill 2018-19 this measure will have retrospective and prospective effect from the date the relevant interest was first applied.
Current law
There are separate legislative provisions covering the charging of interest on the taxes and penalties involved.
Current powers are contained in:
- section 78 Finance Act 1989, in relation to interest on Corporation Tax, Diverted Profit Tax, Inheritance Tax, Stamp Duty, SDLT and POTAS
- section 101 Finance Act 2009, in relation to interest charged on penalties in relation to PAYE
Proposed revisions
Legislation will be introduced in Finance Bill 2018-19 to regularise historical arrangements for charging interest in relation to payments and repayments of certain taxes (including Corporation Tax and Diverted Profits Tax) and the charging of interest on unpaid and late paid penalties for PAYE.
The legislation will have immediate retrospective and prospective effect with retrospection dating back to:
- 18 August 1989 in respect of section 178 Finance Act 1989
- 6 May 2014 for section 101 Finance Act 2009
The legislation will also ensure that in future the interest provisions in Finance Act 2009 apply in relation to penalties charged under POTAS.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
Economic impact
This measure is not expected to have an Exchequer impact and supports the Exchequer in its commitment to protect revenue.
Impact on individuals, households and families
There is no impact on individuals or households as the measure primarily affects businesses.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated there will be any impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure introduces a number of minor changes to confirm existing law and ensures interest regimes operate as intended.
The measure is not expected to have any impact on businesses or civil society organisations undertaking normal commercial transactions.
Operational impact (£m) (HMRC or other)
There are no operational impacts for HMRC as a result of this measure.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be subject to ongoing monitoring.
Further advice
If you have any questions about this change, contact Gary Cummins on Telephone: 03000 586 798 or email gary.cummins@hmrc.gsi.gov.uk.