Policy paper

Changes to restitution interest rules in part 8C of the Corporation Tax Act 2010

Updated 28 April 2025

Who is likely to be affected

Companies who have made a common law claim to, or have already received, restitution interest from HM Revenue & Customs in relation to payment of tax under mistake of law.

General description of the measure

The measure clarifies that Part 8C of The Corporation Tax Act 2010 (‘Part 8C’) applies only to awards of restitution interest that are awarded at a rate of interest which is greater than a rate of statutory interest under the Taxes Acts.

Changes are also being made so that a 2-year time limit for making an assessment under Part 8C will commence from the end of the accounting period in which the claim for restitution is finally determined if the normal time limit for assessments has expired before that time.  

Policy objective

Part 8C is intended to address court-awarded restitution interest on a compound basis in High Court claims with regard to payment of tax under mistake of law or unlawful collection of tax. The draft regulations put beyond doubt that the rules are not applied to claimants who are entitled to awards of simple interest at a rate equivalent to or lower than a similar rate under the taxes acts. 

Changes to the assessing rules will ensure that Part 8C is applied consistently to claimants that fall within the scope of the rules. 

Background to the measure

This measure was announced on 28 April 2025. 

A technical consultation about the changes will run from 28 April 2025 until 30 May 2025.

‘The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025’ are expected to be laid before the House of Commons in autumn 2025 under the made affirmative procedure.

Detailed proposal

Operative date

The amendments will have effect from the date the regulations come into force, so the clarification of the application of Part 8C will apply to payments of restitution interest made on or after that time. The change to the time limit for raising an assessment will apply to situations where the accounting period in which the claim for restitution is finally determined ends after the date the regulations come into force.

Current law

Part 8C was introduced by section 38 of the Finance (No.2) Act 2015. It came into force in respect to payments made on or after 21 October 2015, and the withholding obligation on or after 26 October 2015.

Part 8C was subsequently amended by ‘The Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations’ (SI 2017/364) to exempt certain companies, bring others in, extend the anti-avoidance rule, and clarify certain administrative matters.

The relevant provisions of the current law are contained in sections 357YA to 357YW of Part 8C of the Corporation Tax Act 2010.

Proposed revisions

The legislation is to be clarified to put beyond doubt that a corporate beneficiary of a claim for restitution is not within the scope of the rules where the restitution interest is paid at a rate which does not exceed a statutory rate of interest under the taxes acts.  

The changes will also clarify that an award of restitution interest remains within the scope of the rules where a component of the final award was simple interest paid at a rate not exceeding a statutory rate under the Taxes Acts but the overall payment is more than would be payable under a statutory rate. 

An additional time limit of 2 years after the end of the company accounting period in which the litigation has become final is introduced. An assessment may be made under Part 8C by the later of this new time limit or by the usual time limits provided elsewhere in the taxes acts.

Summary of impacts

Exchequer impact (£ million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
—	nil	nil	nil	nil	nil

This measure is not expected to have an exchequer impact. 

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

There is no impact on individuals as the measure only affects businesses.

Equalities impacts

It is not anticipated that there will be impacts on those in groups sharing protected characteristics.

Impact on business including civil society organisations

This measure will have a negligible impact on an estimated 50 to 60 company groups as it confirms HMRC’s existing interpretation that Part 8C Corporation Tax Act 2010 does not apply to restitution interest which is awarded by the High Court on a simple basis at a rate which is no more than a statutory rate of interest available under the taxes acts. 

One-off costs could include familiarisation since affected companies may need to make themselves aware of the changes. Continuing savings could include reduced administration activity through decreased recording of information due to the proposed changes.     

This measure is expected overall to improve business’ experience of dealing with HMRC as the process for most companies entitled to payments of restitution interest will be simplified. It will also allow earlier resolution of issues relating to the payment of restitution interest.       

This measure is not expected to impact civil society organisations.

Operational impact (£ million) (HMRC or other)

Operational impact for HMRC is anticipated to be negligible for this measure.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from the claims for restitution as and when they are finally determined.

Further advice

If you have any questions about this change, please contact Neil Drinkwater on 0300 0562 434 or email part8cctaamendments2025@hmrc.gov.uk.