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HMRC internal manual

Enquiry Manual

Interest: Introduction

The following pages give guidance on interest for late payment of IT, Class 4 NICs, CGT and CT. The word “tax” should be read as incorporating all.

Basic Principles

Interest accrues on a daily basis

Interest is charged at the prescribed rate (regulations under S178 FA 1989) for each day from a date specified in the particular legislation until the date the tax is actually paid.

Note: The due date for payment is not always the same as the relevant date for interest - see EM4010.

Liability to pay interest arises automatically

The current legislation provides that the tax “shall carry interest” from the specified date until payment. If tax is paid late, interest follows automatically.

There is no right of appeal against interest

Any interest “objections” should be referred to the DMB Interest Review Unit following the guidance in the Self Assessment Manual / COM manual as appropriate - see EM4040.

Note: the taxpayer’s rights are protected: the underlying tax can be appealed, and if the tax is reduced the interest on that tax will automatically be reduced.

There is no statutory power to mitigate interest

See EM4040

Interest is in no sense a penalty

Interest is restitution for loss of use of money over time, like any commercial interest. If the taxpayer has enjoyed the use of the money over a period when the exchequer should have had it, they pay this interest for that use just as they would pay their bank interest for a loan or overdraft. Interest is compensatory, not penal.