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HMRC internal manual

Compliance Handbook

Interest: Under or by virtue of an enactment

You must check whether, and from which date, the FA 2009 interest rules apply to the tax or duty you are dealing with. See CH140160 for full details.

Late payment interest is charged on any amount that is payable by a person to HMRC ‘under or by virtue of an enactment.’

Repayment interest is paid by HMRC on any amount payable to a person ‘under or by virtue of an enactment.’

‘By virtue of an enactment’ means as a result of any Act of Parliament, plus all Regulations, Orders, and Statutory Instruments made under any Act of Parliament that require money to be paid to or by HMRC. It does not include any money due under contracts so that excludes HMRC’s commercial contracts, as well as contract settlements. For more information on contract settlements, see CH140280.

Eventually, all taxes, duties (other than customs duties), penalties and surcharges will be amounts that are subject to late payment interest and repayment interest because they are due under or by virtue of an enactment. However, the interest provisions currently only apply to the taxes, and associated penalties, listed at CH140160. This is because they are the only taxes for which there is an appointed day from which the rules apply.

Interest is specifically excluded from late payment interest and repayment interest. This means that interest is not paid or payable on interest.

If a penalty is charged on an amount of tax, where that tax is subject to late payment interest, then late payment interest applies if that penalty is not paid by the due date. For example, if an income tax inaccuracy penalty is not paid by the due date then late payment interest can be charged on the unpaid inaccuracy penalty, because penalties for inaccuracies are an amount due under an enactment, under Schedule 24 FA 2007.

Late payment interest is not charged where the penalties are suspended. This is because those penalties are not currently due and payable. If penalties, for whatever reason, are cancelled or adjusted, then any late payment interest will also be adjusted.