Interest on tax
HMRC has introduced a new minimum interest rate on tax repayments of 0.5%. This means that interest will be payable even when the Bank of England base rate falls below 1.5%.
Earlier this year the Government said that it would introduce legislation to harmonise interest rates on interest charged and paid by HMRC. From now on, subject to the above, interest charged on tax paid will be based on and move with the Bank of England rate. Interest on tax paid late will be that base rate plus 2.5% and for interest on tax overpaid the rate will be the base rate minus 1%.
I am not sure that a differential of 3.5% is quite what I understood by harmonisation but at least the position is now clear.
Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author.
Date: 26th August, 2009
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