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HMRC cuts interest on overpayments to zero

by The Editor at 11:30 23/01/09 (News)
HM Revenue and Customs is cutting the interest it pays on money it owes to taxpayers to zero per cent.
From next Tuesday, people who pay too much income tax, capital gains tax, National Insurance contributions and stamp duty will not receive any interest on the money held by HMRC while they wait for a refund. They had previously been paid interest at 0.75 per cent, but the rate was reduced following the recent cut in the Bank of England base rate.

This is likely to fuel further criticism of the difference between the rate that HMRC pays taxpayers on money it owes them and the rate HMRC charges for money owed to the taxman. The rate of interest on tax owed to HMRC will fall from 4.5 per cent to three per cent.

HMRC also confirmed that the interest it pays will not fall below zero, meaning that even if interest rates continued to fall, it would never charge interest on money that it owed to individuals and companies.

The reduced rates cover quarterly instalment payments and early payments of corporation tax not due by instalments. These new rates take effect from January 19 2009.

Reduced rates covering late payments and overpayments of all other direct taxes, indirect taxes and national insurance contributions take effect from January 27 2009.

Full details of the rate changes are available on HMRC's website.

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Susie Hughes
The Editor Hardhatter 2009