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HMRC internal manual

Claimant Compliance Manual

Penalties and interest: general

HMRC, in common with most other organisations and businesses, charges interest when it receives monies late. Interest is not intended to be a penalty, it is commercial restitution for the Exchequer being denied the use of the monies. In most areas of HMRC business the charging of interest does not require default, if monies are paid late then interest is charged regardless of why the payment has been delayed. However, for tax credits, interest is only chargeable where there has been fraud or neglect.

You will encounter interest on penalties.

You can find the current rate of interest on the Intranet, from the home page click on Library and then on Lists & Tables and then Interest Rates. Alternatively you can enter ‘Interest Rates’ in Local Search or use the A-Z index. The rate for overpaid tax credits is the same as the rate for Income Tax Self Assessment.

A Section 31 or 32 penalty carries interest from the date on which it becomes due and payable. Where a formal penalty determination is issued this is 30 days from the date on which the customer receives the notice of the penalty determination.

So if the notice is received on 1 May 2011 the penalty must be paid by 31 May 2011 otherwise interest will be automatically charged. If there is any interest to be paid this will be dealt with by the recovery office.