The Taxes (Interest Rate) (Amendment) Regulations 1998

Explanatory Note

(This note is not part of the Regulations)

These Regulations, made under powers contained in section 178 of the Finance Act 1989 (“section 178” and “the 1989 Act” respectively), make provision for the rate of interest applicable for certain purposes of sections 59C and 103A of the Taxes Management Act 1970 (“section 59C”, “section 103A” and “Management Act” respectively).

Subsection (1) of section 178 provides that the rate of interest applicable for the purposes of the enactments to which that section applies is to be the rate provided for by regulations made by the Treasury under that section, and sub-section (3) of section 178 provides that such regulations may make different provision for different purposes of the same enactment. The Regulations so made are the Taxes (Interest Rate) Regulations 1989 (S.I.1989/1297, amended by S.I. 1996/3187) (“the Interest Rate Regulations”). Regulation 3 of the Interest Rate Regulations (as amended) specifies the interest rate applicable under section 178 in relation to various enactments. It also makes provision for changes in the applicable interest rate and for the formula to be used in calculating the new rate.

These Regulations provide for sections 59C and 103A to be added to the enactments to which regulation 3 of the Interest Rate Regulations applies, for the purposes mentioned below.

Section 59C makes provision in relation to surcharges on unpaid income tax and capital gains tax; and subsection (6) of section 59C provides that a surcharge imposed under subsection (2) or (3) of that section shall carry interest at the rate applicable under section 178 from the end of the period of 30 days beginning with the date on which the surcharge is imposed until payment.

These Regulations provide for interest to be charged on surcharges on unpaid income tax or capital gains tax payable in accordance with section 55 of the Management Act (“section 55”), so far as it relates to an amendment or assessment referred to in section 55(1)(a) or (b), or in accordance with section 59B of the Management Act.

Section 103A provides that a penalty under any of the provisions of Part II, IV, VA or X of the Management Act shall carry interest at the rate applicable under section 178 from the date on which it becomes due and payable until payment. (Part VA of the Management Act was inserted by sections 192 to 195 of the Finance Act 1994 (“the 1994 Act”)). Section 103A is only in force so far as it relates to income tax and capital gains tax, under section 199(2)(a) of the 1994 Act, there having been no appointed day for corporation tax purposes, under section 199(2)(b) of the 1994 Act.

These Regulations provide for interest to be charged on penalties under Part II, IV, VA or X of the Management Act, so far as those penalties relate to persons who are within the Self-Assessment regime, and to income tax or capital gains tax.