Interest rates streamlined

A new minimum interest rate on tax repayments of 0.5% is to be introduced by HMRC. This means that in future interest will still be payable even when the Bank of England base rate falls below 1.5%.

The Government will also be introducing changes to the current interest rates regime which will deliver greater transparency and certainty in the way that rates are set and applied. This will pave the way for the implementation of full interest harmonisation which was legislated for in this year’s Finance Bill.

HMRC will recalculate its rates after the September monetary policy meeting using the new formulae provided in the regulations. Harmonisation will result in a change to some of HMRC’s interest rates even if there is no change in the base rate announced by the MPC.

Interest charged on late payments of tax will be the Bank of England base rate plus 2.5 and...