Section 102 Schedule 54: Repayment Interest on Sums to Be Paid by Hmrc
Summary
1.Section 102 is designed to apply repayment interest on a simple and consistent basis to all overpayments of tax and Schedule 54 sets out some special rules regarding amounts carrying repayment interest.
Details of the Section
2.Subsection (1) provides that the section applies to any sums which are payable to a person by HM Revenue & Customs (HMRC) under or by virtue of an enactment. The section is designed to cover those sums due to be paid by HMRC as imposed by statute, while excluding those sums paid by HMRC as an organisation (such as sums paid in respect of the provision of supplies or rent).
3.Subsection (2) provides that both corporation tax and petroleum revenue tax are excluded from this section. In addition, this subsection provides a power for HM Treasury to specify in an order those other repayments which will not fall within the scope of this legislation.
4.Subsection (3) states that amounts provided for by this section will carry interest at the ‘repayment interest rate’ from the ‘start date’ until the date HMRC make the payment or repayment.
5.Subsection (4) introduces Schedule 54.
6.Subsection (5) provides that repayment interest does not apply in circumstances whereby an amount is payable as a result of a court judgement or an order of a court.
7.Subsection (6) provides that repayment interest will not apply on repayment interest itself so maintaining the current position of repaying simple interest.
Details of the Schedule
8.Paragraph 1 states that this part sets out the general rule for determining the repayment interest start date, and that this rule is subject to the provisions of Part 2 of this Schedule.
9.Paragraph 2 state that where an amount has been paid to HMRC, the repayment interest start date is the later of the date when the amount now being repaid was paid to HMRC and the date the payment became due and payable where an amount has been paid in connection with a liability and is now to be repaid.
10.Paragraph 5 provides that for amounts not previously paid to HMRC but that are payable by HMRC as the result of a return being filed or a claim being made, the repayment interest start date is the later of the filing date for the return or the date the claim was required to be made (if any), or the date the return or claim was filed or made.
11.Paragraph 6 restates section 824(3)(b) of the Income and Corporation Taxes Act 1988 (ICTA) by providing that the repayment interest start date for repayments of income tax deducted at source for a year of assessment is 31 January next following that year.
12.Paragraph 7 sets the repayment interest start date at 31 January next following the year that is the later year in relation to the claim for certain claims to carry back loss relief and for the averaging of profits of farmers.
13.Paragraph 8 concerns the application of repayment interest in prescribed Mortgage Interest Relief at Source (MIRAS) cases and replaces section 824(3)(aa)(i) of ICTA.
14.Paragraph 9 concerns the application of repayment interest to repayments made as a result of a claim under section 228 of the Income Tax Act 1952 and is designed to replace section 824(2A) of ICTA.
15.Paragraph 10 recreates the effect of section 236(2) of the Inheritance Act 1984 (IHTA) to provide that where an amount of inheritance tax is overpaid as a result of an order made under the specified sections that repayment interest will run from when that order was made.
16.Paragraph 11 provides the repayment interest start date to be used where a claim is made under the prescribed sections.
17.Paragraph 12 provides the repayment interest start date where an amount is repayable under section 147(2) of IHTA.
18.Paragraph 13 is designed to replace section 824(4) of ICTA in so far as attributing repayment made in respect of income tax.
19.Paragraph 13(2) sets out how the repayment should be attributed to payments of tax.
20.Paragraph 13(3) sets out how the repayment should be attributed to instalment payments of income tax.
21.Paragraph 14 replaces section 824(4A) of ICTA and explains the meaning of income tax deducted at source for the purpose of this Schedule.
Background Note
22.Section 102 is designed to apply repayment interest on a simple and consistent basis to all overpayments of tax. The section sets out the general rules for applying repayment interest on sums to be repaid by HMRC ‘under or by virtue of an enactment’.
23.Both corporation tax and petroleum revenue tax are excluded from the Finance Act 2009 legislation which does not currently accommodate either tax. The intention is to introduce parallel legislation for both taxes in the Finance Act 2010.
24.Schedule 54 sets out the exceptions to the general rules set out in the section regarding repayment interest and covers how repayment interest will operate in particular situations. The provisions cover particular regime-specific rules. Although the aim is to harmonise the application of interest across taxes, some rules of this kind are necessary given the different structure and operation of the various taxes.
25.Part 1 of the Schedule sets out the general rule for applying late payment interest.
26.Part 2 sets out the specific rules to apply where the repayment interest start date does not follow the general rule.
27.Part 3 sets out how any repayment is to be apportioned for specific taxes and in specific circumstances. It goes on to give the definition for income tax deducted at source.
