CH 6 - Interest on late paid CT and Repayments

Question 1

What is INTEREST on late paid tax and when it runs?
(CT)

Answer 1

Interest on late paid CT runs from the due date for payment to the actual date of payment

Interest rate due is 6.5% for CT paid late not via instalments
& 5% if paid via instalments

Question 2

What is repayment interest and what it runs from?
(CT)

Answer 2

Repayment interst runs from the later of:
* the normal due date for payment, and
* the actual payment date

rate of interest is 3% & for instalments 3.75%

Question 3

How interest paid/received on overdue/overpaid tax is taxed in CT comp?

Answer 3

Interest paid is a non-trading debit and deduction form non trading profit income (LR)

Interest received on overpaid CT is taxed under non trading profits (LR)

Question 4

How repayment interest is calculated where losses are carried back?

Answer 4

Where:
* a trade loss is carried back, and
* the previous accounting period falls wholly within the 12 months before the start of the loss-making accounting period,

The repayment interest will be calculated from the normal due date of payment for the previous accounting period until the date the corporation tax is repaid.

In any other case, CT repaid as a result of a loss/deficit carried back is treated as a repayment of CT for the accounting period in which the loss/deficit arose.

Question 5

Where restitution interest applies & its rate

Answer 5

Where:
* HMRC are required to pay interest in respect of a claim for restitution with regards to a payment made under a mistake of law or the unlawful collection of an amount in respect of taxation,
* a court has determined that the interest is due, or the interest is payable under a final settlement agreement between HMRC and the company, and
* the interest is not limited to simple interest at a statutory rate,

CT is payable on the restitution interest at a rate of 45%