What interest rate is payable: simple interest
Statutory interest is payable at the rate applicable under section 197 FA 1996. It is simple interest rates, calculated daily (for every day including Sundays), as set out in the Air Passenger Duty and Other Indirect Taxes (Interest rate) Regulations 1998.
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).
However, if the specified base rate falls below 1.5% the statutory interest rate is set at a minimum rate of 0.5%. This ensures the rate will never fall to zero.
VATA s78 (3)
FA 1996 s 197
SI 1998/1461 as amended