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HMRC internal manual

Compliance Handbook

Interest: Repayment Interest: Overview

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.

HMRC pays repayment interest on overpayments and repayments.

Repayment interest applies a simple and consistent interest to overpayments of taxes, duties and penalties.

Repayment interest is recompense for the loss of use of the money that has been overpaid.

Eventually, repayment interest will apply to all taxes and duties (other than customs duties). 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.

Repayment interest is not payable on repayment interest. Therefore, the interest is simple interest, not compound interest.

There are also exclusions that will apply even once the interest provisions have been extended to all taxes and duties. Repayment interest does not apply to

  • amounts described in an order made by the Treasury, and
  • amounts payable as a result of an order or judgment of a court that has the power to allow interest on the amount.

There is a general rule, which is modified in particular circumstances by special provisions.

General rule

Repayment interest runs from the repayment interest start date until the repayment interest end date.

The general rule defines the repayment interest start date as follows.

  1. Where the repayment interest relates to the repayment of an amount paid to HMRC, the repayment interest start date is the later of
* the date on which the amount was paid to HMRC, and
* the date on which the payment became due and payable.
  1. Where the repayment interest relates to an overpayment arising because a return is filed, or a credit becoming due because a claim is made, then the repayment interest start date is the later of
* the date (if any) when the return was required to be filed, or the claim to be made, and
* the date when the return was actually filed or the claim actually made.

You won’t use this second definition of the repayment interest start date yet because it is not relevant to the taxes to which the FA 2009 interest provisions currently apply.

The repayment interest end date is the date when the amount is repaid or set off against another liability. There are rules about allocating overpayments against other liabilities.

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Special provisions

In particular circumstances there are special provisions that change the repayment interest start dates. There are no special provisions that change the repayment interest end date or change the amount on which interest is paid.

FA09/S102

FA09/SCH54