The law and legal powers: what interest rate is payable
Statutory Interest is payable at the rate applicable under section 197 FA1996. It is simple interest calculated daily (for every day including Sundays) as set out in the Air Passenger Duty and Other Indirect Taxes (Interest Rate) Regulations 1998 (SI1998/1461 as amended).
The Regulations make provision for the interest rates to change on the sixth day of any month, in accordance with various specified formulas. The formulas are all based on the official bank rate determined by the most recent meeting of The Monetary Policy Committee of the Bank of England. Statutory interest is calculated to be 1% less than the Bank of England rate (base rate).
If however the specified base rate falls below 1.5% the statutory interest rate is set to a minimum of 0.5%. This ensures the rate will never fall to zero.
Paragraph 13 of schedule 3 FA 2001
FA 1996 s 197
SI1998/1461 as amended