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HMRC internal manual

Company Taxation Manual

CTSA: quarterly instalments: debit interest

Interest under TMA70/S87A (as extended by REG7) on late and inadequate instalment payments is at a lower rate than that generally chargeable under TMA70/S87A.  This lower rate applies to interest that accrues from the due date for the first instalment to the normal due date (nine months and one day after the end of the accounting period).

Interest chargeable under these provisions is referred to as ‘debit interest’ to distinguish it from ‘normal’ late payment interest and to recognise it as the counterpart of credit interest.  (‘Debit’ and ‘credit’ interest are Departmental and not statutory terms.)

  • REG7 contains the necessary amendments to TMA70/S87A to make interest run from the instalment due dates in the case of a large company.
  • Regulation 6 of the Taxes (Interest Rate) (Amendment No 2) Regulations 1998 (SI1998/3176) amends the Taxes (Interest Rate) Regulations 1989 (SI1989/1297) by providing for a special, lower rate of interest to run in respect of underpayments of tax from the due date for the first instalment to the normal due date.

The formula is reference rate plus 1 per cent.

  • As with all other interest chargeable under TMA70/S87A for accounting periods ending on or after 1 July 1999, debit interest is deductible in computing profits for CT purposes, FA98/S33, see CTM92190.

Debit interest is not calculated and charged until:

  • the normal due date has passed, and
  • the company makes an SA return, or

an Officer makes a Revenue determination, in the absence of a return.