Tax administration: extension of HMRC debtor and creditor interest rate to Scotland, Northern Ireland and NICs
Published 9 December 2015
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Who is likely to be affected
Taxpayers in litigation cases where there is a tax-related debt payable under a court judgment or order with interest due and HM Revenue and Customs (HMRC) is either the debtor or creditor.
General description of the measure
This measure extends to Scotland and Northern Ireland the provision introduced by section 52 of Finance (No. 2) Act 2015. It also extends the definition of ‘taxation matter’ in section 52 of Finance (No. 2) Act 2015 to include National Insurance contributions (NICs). The measure ensures that where HMRC is party to a tax-related debt payable under a court judgment or order, anywhere in the UK, the rates of interest are those set out in tax legislation. It also sets those rates.
Policy objective
The measure ensures consistent application UK wide that rates of interest payable on all tax-related debts to which HMRC is a party are contained within tax legislation. It also sets the rates of interest on tax-related debts owed by or to HMRC under a court judgment or order to an appropriate level given prevailing interest rates. It also extends the definition of ‘taxation matter’ to include NICs.
Background to the measure
Section 52 of Finance (No.2) Act 2015 introduced in England and Wales a judgement debt rate of interest. This measure extends the same judgement debt rate to apply in Scotland and Northern Ireland and therefore makes the measure consistent across the UK. It also extends the definition of ‘taxation matter’ to include NICs.
Detailed proposal
Operative date
This measure will have effect on and after the date of Royal Assent to Finance Bill 2016.
Current law
Scotland: legislation dealing with interest on court judgements is in section 9 Sheriffs Court (Scot Extracts Act 1892) and rule 77 of Rules of Court of Session. The rate of interest is currently 8%.
Northern Ireland: legislation dealing with interest on court judgements is in section 33A of Judicature (Northern Ireland) Act 1978, article 127 of Judgements Enforcement (Northern Ireland) Order 1891 and rule 9(1) of Rules of the Court of Judicature. The rate of interests is currently 8%.
NICs: In addition to the Scottish and Northern Irish legislation set out above, legislation dealing with interest on court judgements in England and Wales is in section 17(1) of Judgement act 1838 and section 74(1) of County Courts act 1984. The rate of interest is currently 8%.
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to disapply the interest rates in relation to all judgment debts (including pre-existing judgments) for Scotland, Northern Ireland where such debts relate to a taxation matter, whether HMRC is the debtor or creditor and instead apply rates of interest of at 2.5% and 3% respectively. The legislation will also extend the definition of ‘taxation matter’ to include NICs.
Summary of impacts
Exchequer impact (£m)
| 2015 to 2016 | 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|---|
Robust estimates of the Exchequer impacts are not available.
Economic impact
This measure is not expected to have any economic impacts.
Impact on individuals, households and families
This measure is not expected to impact on individuals, households or family formation, stability or breakdown.
Equalities impacts
There are no equality impacts arising from this measure.
Impact on business including civil society organisations
This measure is not expected to impact businesses or civil society organisations because it provides clarity and ensures the legal basis is the same whether debts are settled by court action or not.
Operational impact (£m) (HMRC or other)
Setting a unified rate of judgement debt interest will have little or no operational impact on HMRC.
Other impacts
Justice impact test: the measure will provide fairness in respect of the rate of judgement debt interest across the UK.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Helen Sawyer on Telephone: 03000 586355 or email: helen.sawyer@hmrc.gsi.gov.uk