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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Corporation Tax self-assessment (CTSA): the payment obligation: late payment interest - tax deductible

Late payment interest, chargeable under TMA70/S87A for accounting periods ending on or after 1 July 1999, is an allowable expense in computing CT profits. It falls to be taken into account for tax purposes as a non-trading debit under the loan relationship legislation (FA98/S33 and FA98/SCH4/PARA7). The same is true of interest under:

  • TMA70/S87 on late payments of ACT under ICTA88/SCH13,
  • IT deductible from company payments under ICTA88/SCH16,
  • TMA70/S87A as extended by SI1998/3175 Regulation 7, on late and inadequate instalment payments (‘debit interest’), see CTM92660.

In recognition of this change, the formulae for setting interest rates under Section 87A no longer contain an adjustment for tax. The new formulae are at SI1989/1297 Regulations 3ZA and 3ZB inserted by SI1998/3176 Regulation 6.