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HMRC internal manual

Compliance Handbook

Interest: Repayment interest: Special provisions for start dates: Income tax deducted at source

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.

A special provision changes the repayment interest start date from the general rule, see CH146040, where income tax is deducted at source. The repayment interest start date is 31 January of the year following the year to which the income tax relates.

‘Income tax deducted at source’ is where a person making a payment to another person is required to deduct tax from that payment. To determine the repayment interest start date it means

  1. income tax deducted (or treated as deducted) from any income, or treated as paid on any income, in respect of that year, and
  2. amounts which, in respect of that year, are tax credits to which section 397(1) or 397A(2) of ITTOIA 2005 applies.

But does not include a reference to amounts which, in that year, are deducted at source under PAYE regulations in respect of previous years.

Examples of income that might have tax deducted at source include

  • employment income which is subject to PAYE,
  • bank and building society interest paid net,
  • annuities paid net, and
  • royalties paid net.

See CH146260 for an example of the special provision to determine the repayment interest start date where there is income tax deducted at source.