Controlled foreign companies — treatment of interest on the reversal of state aid recovery
Published 26 November 2025
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Who is likely to be affected
UK-based multinational groups who had amounts of interest recovered from them by HMRC under paragraph 7 of Schedule 7ZA Taxation (International and other Provisions) Act 2010 (TIOPA 2010) and subsequently have those amounts repaid, pursuant to The Controlled Foreign Companies (Reversal of State Aid Recovery) Regulations 2024.
General description of the measure
This measure allows for interest to be applied to repayments of amounts of interest recovered by HMRC under paragraph 7 of Schedule 7ZA. Current law provides for the repayment of tax and interest amounts collected under Schedule 7ZA, but only provides for interest to be applied to repayments of tax.
Policy objective
This measure operates alongside The Controlled Foreign Companies (Reversal of State Aid Recovery) Regulations 2024 so that companies affected by the 2019 EU State Aid Decision on the Controlled Foreign Companies rules are put into the position they would have been in had that decision not been made and no recovery of alleged State aid had taken place.
Background to the measure
This measure was announced at Budget 2025.
Detailed proposal
Operative date
The measure will take effect from 2 December 2025.
Current law
The Controlled Foreign Companies regime is set out in Part 9A Taxation (International and other Provisions) Act 2010 (TIOPA 2010).
TIOPA 2010 is treated, by virtue of paragraph (b) of Schedule 4 to the Taxation (Post-transition Period) Act 2020, as having a Schedule 7ZA.
Schedule 7ZA provides for the recovery of amounts in relation to the 2019 European Commission State aid Decision on the Controlled Foreign Companies rules.
The Controlled Foreign Companies (Reversal of State Aid Recovery) Regulations 2024 provide for the amounts recovered under Schedule 7ZA to be repaid.
Section 826 Income and Corporation Taxes Act 1988 provides for the interest to be applied to amounts of tax repaid under the regulations.
Proposed revisions
Legislation will be introduced in Finance Bill 2025-26, applicable from 2 December 2025, to provide for repayment interest to be paid in respect of amounts of interest that were recovered under paragraph 7 of Schedule 7ZA and are subsequently repaid.
The measure applies in relation to repayments of interest made to companies as a result of the cancellation of an interest charging notice given under Schedule 7ZA.
The interest payable is the amount that would have been payable under section 826 Income and Corporation Taxes Act 1988 (interest on tax overpaid) if the relevant repayment had been within the scope of those repayment interest provisions.
This measure applies to Schedule 7ZA interest only, and does not alter the general position that repayment interest is only paid in respect of repayments of tax.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| negligible | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Macroeconomic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses.
Equalities impacts
This measure only affects businesses; therefore, it is not anticipated that there will be disproportionate impacts on groups sharing protected characteristics.
Administrative impact on business including civil society organisations
This measure is expected to have a negligible impact on multinational businesses which had amounts of interest recovered from them by HMRC under paragraph 7 of Schedule 7ZA TIOPA 2010, and who will now be eligible for repayment interest in relation to amounts of interest repaid pursuant to The Controlled Foreign Companies (Reversal of State Aid Recovery) Regulations 2024.
One-off costs will include familiarisation with this change and confirming payment details to HMRC. There are not expected to be any continuing costs.
This measure is not expected to impact on businesses experience of dealing with HMRC as it does not change any processes or tax admin obligations.
There are not expected to be any impacts on civil society organisations.
Operational impact (£ million) (HMRC or other)
The measure will have a negligible operational impact on HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communications with affected taxpayer groups.
Further advice
If you have any questions about this change, email mailboxcfcs@hmrc.gov.uk.