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COM128001 | Repayments/reallocations: repayment interest: introduction

From HM Revenue & Customs · COTAX Manual

If tax has been paid for an Accounting Period (AP) ending after the 30 September 1993 and there is an overpayment of:

  • Corporation tax

  • Income tax

  • payments of tax credits

  • CIS25 deductions (only for a period before 05 April 2002), see Company Taxation Manual CTM92170

  • Section 458 (S458) Corporation Tax Act (CTA 2010 (formerly S419 (4) Income and Corporation Taxes Act (ICTA) 1988) relief (only for APs ending on or after 01 October 1993) see CTM98245

Which is to be repaid or reallocated, the overpayment potentially attracts repayment interest under S826 ICTA 1988. Repayment interest may be paid on repayments or reallocations:

  • regardless of the place of residence of the recipient company

  • on condition that the repayment relates to a period for which the company is within the charge to Corporation Tax

For APs ending after the 01/07/99 repayment interest is chargeable as ‘interest’ under the loan relationship rules S479 CTA 2009).

Please note that; repayment interest does not apply to:

  • overpayments of late payment interest (LPI) or penalties

  • repayments made by HMRC Payments of payments made in error or incorrectly allocated

  • repayments of any tax overpaid following assessments under s956 or s957 Income Tax Act (ITA) 2007 (deductions of income tax), or repayments of withheld income tax following a CT61 set-off (s953(3b) ITA 2007)