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HMRC internal manual

COTAX Manual

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HM Revenue & Customs
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Interest: how interest is calculated: legislation

The legislation in respect of charging interest is as follows. The table below gives a brief explanation of what the legislation relevant to this subject contains.

Section Explanation
   
S87A TMA 1970 (as extended by regulation 7) of Corporation Tax (Instalments Payments) Regulations SI 1998, No 3175 Debit interest is charged on late or insufficient payment of instalments from the quarterly instalment due dates to the date of payment or normal due date.
S87A TMA 1970 (as extended by regulation 8) of Corporation Tax (Instalments Payments) Regulations SI 1998, No 3175 Credit interest is charged on early or excessive payments of corporation tax from the quarterly instalment due dates to the date of payment or normal due date.
Regulations 4, 5 and 7  
Corporation Tax (Instalment Payments) Regulations 1998 (Statutory Instrument 3175) The due and payable date for a CT instalment.  
  10(1) ICTA 1988 The normal due and payable date for a CT Pay and File AP CT is nine months and one day after the end of the AP.
  18 CTA 2010 Deals with claims to the small companies’ rate of Corporation Tax.
  239(3) ICTA 1988 Claim to carry back surplus ACT and treat it as ACT paid in respect of an AP beginning in the previous six years.
  342 (3A) ICTA 1988 Allows a company in liquidation to receive interest up to £2,000 and not include it in profits chargeable for CT purposes.
  393A ICTA 1988 Allows a company to carry back a trade loss, for losses arising in APs ending in the period from 01 April 1991 to 01 July 1997:
  • that cannot be utilised against profits arising in the AP in which the loss is incurred
  • for up to three years preceding the loss period.    
      455 CTA 2010 (formerly 419 ICTA 1988) Liability to tax when a close company makes a loan or advance to a participator or an associate of a participator.
      455(3) (formerly 419(3) ICTA 1988) Determines the due date for tax due under S455 CTA 2010.
      458 CTA 2010 Relief in terms of tax against a liability under S455 CTA 2010 or S419 ICTA 1988 when the loan or advance to the participator has been repaid (or repaid in part) on or after 1 April 2010.
      419(4) ICTA 1988 Relief in terms of tax against a liability under S419 ICTA 1988 when the loan or advance to the participator has been repaid (or repaid in part) before 1 April 2010.
      83(2) FA 1996 Allows a company to carry back a non trading deficit arising in APs ending in the period from 01 April 1996 to 01 July 1997:
  • that cannot be utilised against profits arising in the AP in which the non trade deficit is incurred
  • for up to three years preceding the non trade deficit period.    
      39 F(No2)A 1997 Amends S393A ICTA 1988, so that losses arising in APs ending on or after 02 July 1997, may only be carried back for a period of one year.
      40 F(No2)A 1997 Amends 83(2) FA 1996, so that non trading deficits arising in APs ending on or after 02 July 1997, may only be carried back for a period of one year.
      59D(1) TMA 1970 The normal due and payable date for CTSA AP is nine months and one day after the end of the AP.
      87A TMA 1970 Late payment interest is charged from the normal due date to the date of payment.
      87A(4) TMA 1970 Interest on ACT carried back runs to the normal due date of the AP from which it was carried back.
      87A(4A) TMA 1970 Interest when a non-trading deficit is carried-back to an earlier AP runs to the normal due date of the AP from which it was carried back.
      87A(4B) TMA 1970 When ACT that becomes surplus as a result of the carry-back of a non-trading deficit is itself carried-back, interest runs to the normal due date of the AP from which the non-trading loss was carried back.
      87A(6) TMA 1970 Provides that the carry-back of a trading loss is not effective for interest purposes until the normal due date for the AP in which the loss is incurred, unless the carry-back is to a period that falls wholly within the twelve months before the AP in which the loss is incurred.
      87A(7) TMA 1970 ACT that becomes surplus as the result of loss relief being carried back may be carried back to a still earlier AP. Interest on the displaced ACT runs to the normal due date of the AP from which the loss was carried back.