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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: credit interest

The regulations introducing quarterly instalment payments of tax by large companies (see CTM92500 onwards) entitle all companies to be paid interest (‘credit interest’) on certain payments of tax made before the normal due date.

When a company makes quarterly instalment payments that prove to have been excessive, it receives ‘credit interest’ on the excess (see CTM92670). Credit interest is payable from the date the company is due to pay its first instalment to the normal due date for payment. The first instalment is due six months and 13 days after the first day of the accounting period.

The provision will also benefit any company that pays some tax early, regardless of whether they are a quarterly instalment payments case. Interest is due on amounts paid before the due and payable date and calculated from the later of:

  • the date the tax is paid, or
  • the date the first instalment would have been paid, had the company been within the quarterly instalment payments regime.

Credit interest is paid at a higher rate than repayment interest. The formula for setting the rate (at SI1989/1297 Regulation 3BA (4), inserted by SI1998/3176 at Regulation 8), is Reference Rate minus 0.25, compared with Reference Rate minus 1.0 for repayment interest.

Credit interest is calculated automatically by COTAX. It is credited to the company’s account:

  • after a charge (whether it is a SA or a Revenue determination) is recorded by the system, but
  • not until the normal due date has passed.

For more information see the On-line Company Tax Manual (COM), the ‘pursuit’ and ‘repayments and reallocations’ business areas.

It may sometimes be necessary to calculate and repay credit interest before the due and payable date. If you have a case when you want to make such a repayment please contact the Accounts Office responsible for the case.