Repayments / reallocations: non automatic repayments: repayment interest
Repayments of overpaid CT, Income Tax, payments of tax credits and S458 CTA 2010 relief fall within the repayment interest provisions of S826 ICTA 1988. Such a repayment cannot attract repayment supplement (Word 26kb) under S825 ICTA 1988 because the sections are mutually exclusive.
Repayment interest may be paid on repayments regardless of the place of residence of the recipient company on condition that the repayment relates to a period for which the company is within the charge to Corporation Tax.
Repayment interest is chargeable to tax.
You use function DIRR (Direct Repayment) to repay overpayments including specific amounts from a COTAX record and repayment interest is automatically included if appropriate.
If you issued the repayment by manual payable order because the amount to be repaid was £150,000 or more and you did not have the bank details, then you should have included any repayment interest due when you completed the PORF (Payable Order Request Form), see COM125022. Once the RSA enters the PO serial number onto COTAX and the repayment issued date using function MIPO (Manual Issued Payable Order), COTAX automatically calculates any additional repayment interest due and so long as no repayment inhibit signals are set, repays it.
There are occasions where, if the repayment and associated repayment interest is cancelled, COTAX does not recalculate the repayment interest correctly when repaying again. In these cases you need to calculate the repayment interest manually and reintroduce repayment interest as a district set off (DSET), code no 50881. See COM125094 and COM122010 for more information.
Where you make a manual repayment outside the scope of COTAX and repayment interest is appropriate, you should calculate the repayment interest using function RINT (Repayment Interest Calculation) and include it in the repayment. If the repayment interest is not to be included in the repayment, you can enter it onto a COTAX record using function DSET (District Set-Off) code 50881. See COM122010 for further guidance.
COTAX does not automatically add repayment interest to any amount that is reallocated from a COTAX record to the OAS account using function REOD (Direct Reallocation Out Of COTAX). If you need to add repayment interest to an amount allocated to OAS, repayment from a CTSA AP under enquiry, you must send a form CT251 to the CT Unit Cumbernauld on the same day that you do the reallocation, showing the date from which repayment interest should be calculated. See the action guide at COM125064 for details and COM120100 for guidance on completing form CT251.
Calculating repayment interest
Repayment interest is paid from the material date, or date of payment if later, to the date on which the order for repayment is issued. You need to enter the day after the material date in function RINT as the date from which interest needs to be calculated.
Repayment interest is paid on repayments of Income Tax and payments of tax credits from the day after the end of the AP to the date on which the order for repayment is issued.
See CTSA material dates (Word 112kb) for full details of the date to use.
Repayment interest is paid on tax repaid as a consequence of a claim under S458 CTA 2010 if the loan or advance was made in an AP ending on or after 1 October 1993. See Company Taxation Manual CTM98245 and CTM98265 for details about material dates for these cases.
Repayments of Income Tax, payments of tax credits and S458 relief may be paid using function DSET. See COM122010 for more information.
Repayment interest does not apply to the following.
- Overpayments of late payment interest (LPI) or penalties.
- Repayments made by the CT Unit Cumbernauld of payments made in error or incorrectly allocated.
- Repayments of any tax overpaid following assessments under ICTA88/Sch 13 or Sch 16 for deductions of Income Tax or Advance Corporation Tax.
The CT Unit Cumbernauld make manual repayments of repayment interest through OAS on certain repayments made early. See COM125070 for more information.