Interest on tax underpaid by companies

Produced by Tolley in association with

Corporation Tax

Guidance

Interest on underpaid corporation tax by companies is intended to encourage prompt payment. HMRC interest rates are set in legislation and are linked to the Bank of England base rate. Late payment interest is set at the base rate plus 2.5%.

A harmonised regime is in place in respect of interest for the late payment of all taxes, with the exception of corporation tax (see below). The regime applies a single rate of simple interest on late payments, rather than applying a different rate to different taxes. This guidance note focuses on interest payable by companies. For details of interest payable under self assessment for individuals, such as partners and sole traders, see the Interest and penalties on late paid tax under self assessment guidance note.

When is interest charged?

The Taxes Management Act 1970 provides that tax 'shall carry interest' at the late payment rate from the late payment interest start date until the date of payment.

A charge to interest can arise in respect of:

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Anton Lane

Managing Partner, Edge Tax LLP , Corporate Tax, OMB, Employment Tax, International Tax, Personal Tax, IHT Trusts and Estates

I started my career helping to sort out tax problems for high net worth individuals, corporations and high profile clients under investigation for suspected serious fraud at Ernst & Young. I specialised in anti avoidance legislation targeting offshore structures and held senior positions with large offshore fiduciary service providers. I established the Edge brand over a decade ago and in 2012 focused the main business on managing tax risks, handling suspected serious fraud cases and assisting clients and advisers with disclosures to HMRC.

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