Interest: Forward Interest
If an instalment offer is the only feasible method of settlement you must calculate your suggested offer to include ‘forward interest’. Forward interest is not statutory interest, it is designed to compensate the Department for the delay in obtaining the monies. It is calculated by applying the current rate of interest for HMRC, plus 1%, to the total unpaid balance for half of the period of payment.
You should always check the current rate of interest when calculating interest as interest can change and these changes are not always well publicised.
You can find the current rate of interest on the Intranet - from the HMRC home page click on Library > A - Z > Interest Rates.