COM125090 - Repayments / reallocations: non automatic repayments: repayment interest
Repayments of overpaid CT, income tax, payments of tax credit, CIS25 deductions and S458 CTA 2010 (formerly S419 (4) ICTA 1988) relief for APs ending on or after 1 October 1993 fall within the repayment interest (Word 81.5kb) provisions of S826 ICTA 1988. Such a repayment cannot attract repayment supplement (Word 26kb) under S825 ICTA 1988 because the sections are mutually exclusive.
Repayment interest may be paid on repayments
- Regardless of the place of residence of the recipient company
- On condition that the repayment relates to a period for which the company is within the charge to Corporation Tax
For APs ending on or before 01/07/99 repayment interest is not chargeable as ‘interest’ under the loan relationship rules. This is because S826(5) ICTA 1988 says that repayment interest ‘shall not be brought into account in computing any profits or income’. For APs ending after 01/07/99 repayment interest is chargeable to tax, see S826(5A).
Responsible Offices
Function DIRR (Direct Repayment) is used to repay overpayments including specific amounts from a COTAX record and repayment interest is automatically included (if appropriate). When you use DIRR and exceptionally select the option to repay manually you must also use Function MIPO (Record Manually Issued Payable Order) to record the payable order serial number and repayment issued date (screen COT172C).
Notes:
- If you enter a repayment issued date in MIPO which is later than the repayment date displayed in Function VPPD (View Postings & Payment Details) then COTAX will calculate and automatically issue a payable order for additional repayment interest.
- There are occasions where, if the repayment and associated repayment interest is cancelled, COTAX will not recalculate the repayment interest correctly when repaying again. In these cases you need to calculate the repayment interest manually - see subject ‘Repayments/reallocations : non auto repayments’ (COM125094) - and reintroduce repayment interest as a District Set off (DSET), code no 50881 - see subject ‘Reallocations into COTAX - responsible office’ (COM122010).
Where you make a manual repayment outside the scope of COTAX and repayment interest is appropriate, you should calculate the repayment interest using Function RINT (Repayment Interest Calculation) and include it in the repayment. If the repayment interest is not to be included in the repayment you can enter it onto a COTAX record using Function DSET (District Set-Off) - code 50881 - see subject 'Reallocation into COTAX - Responsible Office' (COM122010) in this business area.
COTAX does not automatically add repayment interest to any amount that is reallocated from a COTAX record to the OAS (Word 24kb) account using Function REOD (Direct Reallocation Out Of COTAX). If you need to add repayment interest to an amount allocated to OAS (repayment from a CTSA AP under enquiry), you must send a form CT251 to Banking Operations office on the same day that you do the reallocation, showing the date from which repayment interest should be calculated. For more information see the Action Guide 'Early Repayment CTSA APs - Responsible Office' (COM125064) in this business area for details.
Calculating Repayment Interest
Repayment interest is paid from the material date (or date of payment if later) to the date on which the order for repayment is issued. You need to enter the day after the material date in Function RINT as the date from which interest needs to be calculated.
Repayment interest is paid on repayments of Income Tax and payments of Tax Credit
- For CTSA APs: From the day after the end of the AP
- For CT Pay & File: From the normal Corporation Tax due date for the AP
SeeCTSA material dates (Word 112kb) for full details of the date to use.
To the date on which the order for repayment is issued
Repayment interest is paid on repayments of CIS 25. (Only CIS 25 deductions suffered prior to 06 April 2002 are allowable against CT liabilities). See Company Taxation Manual CTM92170.
Repayment interest is paid on tax repaid as a consequence of a claim under S458 CTA 2010 (formerly S419(4) ICTA1988) if the loan or advance was made in an AP ending on or after 1 October 1993. See Company Taxation Manual CTM98245 / CTM98265 for details about material dates for these cases.
See Company Taxation Manual CTM21240 regarding repayment interest on a repayment of ACT under the FID provisions.
Repayments of Income Tax, payments of tax credit, CIS25 deductions, S458 (formerly S419(4)) relief and ACT under the FID provisions may be paid using Function DSET (see subject 'Reallocation into COTAX - District').
Note: Repayment interest does not apply to
- Overpayments of late payment interest (Word 23kb) (LPI) or penalties
- Repayments made by Banking Operations office of payments made in error or incorrectly allocated
- Repayments of any tax overpaid following assessments under ICTA88/Sch 13 or Sch 16 (deductions of income tax or advance corporation tax)
Banking Operations office make manual repayments of repayment interest through OAS on certain repayments made early. For more information see subject 'Early Repayment - Banking Operations' (COM125070) in this section.
For a list of forms relevant to this subject, see COM125091.
For a list of functions to use in particular situations, see COM125092.
For legislation applying to this subject, see COM125093.
