Background Note
35.Section 101 is designed to apply a simple and consistent interest charge to late payments across all taxes and duties. Late payment interest will apply, for the majority of payments due to HMRC and made late, from the payment due date until the date that payment is received. The interest charged will be simple interest, and will not generally be deductible in computing profits or income.
36.The section sets out a general proposition for applying late payment interest to any sum due to HMRC but paid late. The formulation follows that used at section 127(1) of the Finance Act 2008 designed to facilitate recovery action for sums owed to HMRC.
37.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 Finance Act 2010.
38.This Schedule sets out the exceptions to the general rules set out in the section and how interest will operate in particular situations. These provisions cater for 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.
39.Part 1 of this Schedule sets out the amounts to which late payment interest will apply in particular circumstances. The first two paragraphs deal with claims to incorrectly reduce the payments on account due under the income tax self assessment system.
40.Part 2 sets out the situations where the late payment interest start date does not coincide with the date that the tax for the period or on the transaction is due for payment. The main situation where this applies is when a tax charge changes after it has been initially established, either due to amendment, correction or by some other method. The other situation where the late payment interest start date does not coincide with the date that the tax is due for payment is where HMRC brings tax into charge, usually by making an assessment where one has not already been made.
41.Part 3 sets out the situations where the late payment interest end date does not coincide with the date that the tax for the period or on the transaction is due for payment.
42.Part 4 restates elements of section 91 of TMA, defining how interest is to be treated in circumstances where the taxpayer qualifies for a relief. As well as defining the conditions that must be met for the taxpayer to qualify, the legislation sets out how any overpayments of late payment interest are to be repaid to the taxpayer.
