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HMRC internal manual

Debt Management and Banking Manual

Interest: Interest Review Unit (IRU): Corporation Tax (CT): CTSA Negative credit interest

There may be cases where an amount of credit interest has been given and then repaid asan ‘overpayment’ because all other amounts are paid. This is usually where theQuarterly Payment (QP) indicator is not set. When the QP signal is finally set and thecredit interest properly worked out, a ‘negative credit interest amount’ will beoutstanding. This is ‘clawing back’ money paid to the company in error because theoriginal credit interest is now shown to have been ‘excessive’. A debit interest chargemay also be made.

Where the tax had been paid in full or overpaid before the credit interest was given, theIT system will not charge late payment interest on any amount of negative credit interestreclaimed from the company.

However some or all of the credit interest may have originally been used towards payingthe tax bill, making it appear that the company do not need to pay the balance of tax.When the negative credit interest is reclaimed at a later date, this will show that theamount of tax has not been paid after all. The IT system will charge late payment interestwhen the negative credit interest is paid because this will be taken as a ‘late’ paymentof tax. The negative credit interest is effectively a means of claiming the underpaid tax.