Income and Corporation Taxes Act 1988

826 Interest on tax overpaid. U.K.

M1 (1) In any case where—

(a) a repayment falls to be made of corporation tax paid by a company for an accounting period which ends after the appointed day; or

[F1 (aa) a repayment falls to be made under sections 246N and 246Q of advance corporation tax paid by a company in respect of distributions made by it in such an accounting period; or]

(b) a repayment of income tax falls to be made in respect of a payment received by a company in such an accounting period; or

(c) a payment falls to be made to a company of the whole or part of the tax credit comprised in any franked investment income received by the company in such an accounting period [F2 ; or

(d) a payment of R&D tax credit falls to be made to a company under Schedule 20 to the Finance Act 2000 in respect of an accounting period][F3 ; or

(e) a payment of land remediation tax credit or life assurance company tax credit falls to be made to a company under Schedule 22 to the Finance Act 2001 in respect of an accounting period,]

then, from the material date until [F4 the order for repayment or payment is issued], the repayment or payment shall carry interest at the rate which, under section 89 of the Management Act, is for the time being the prescribed rate for the purposes of this section.

(2) [F5 Subject to section 826A(2),] in relation to corporation tax paid by a company for an accounting period, the material date for the purposes of this section is the date on which corporation tax was paid or, if it is later, the date on which corporation tax for that accounting period became (or, as the case may be, would have become) due and payable in accordance with [F6 section 59D of the Management Act (payment of corporation tax)].

[F7 (2A) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(3) In relation to a repayment of income tax falling within subsection (1)(b) above or a payment of the whole or part of a tax credit falling within subsection (1)(c) above, [F9 the material date is the day after the end of the accounting period] in which the payment referred to in subsection (1)(b) above or, as the case may be, the franked investment income referred to in subsection (1)(c) above was received by the company.

[F10 (3A) In relation to a payment of R&D tax credit falling within subsection (1)(d) above the material date is whichever is the later of—

(a) the filing date for the company’s company tax return for the accounting period for which the R&D tax credit is claimed, and

(b) the date on which the company tax return or amended company tax return containing the claim for payment of the R&D tax credit is delivered to the Inland Revenue.

For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the M2 Finance Act 1998.]

[F11 (3B) In relation to a payment of land remediation tax credit or life assurance company tax credit falling within subsection (1)(e) above the material date is whichever is the later of—

(a) the filing date for the company’s company tax return for the accounting period for which the land remediation tax credit or the life assurance company tax credit is claimed, and

(b) the date on which the company tax return or amended company tax return containing the claim for payment of the land remediation tax credit or the life assurance company tax credit is delivered to the Inland Revenue.

For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.]

(4) For the purposes of this section a repayment of tax made on a claim under section 419(4) shall be treated as if it were a repayment of corporation tax for the accounting period in which [F12 the event giving rise to entitlement to relief under section 419(4) occurred] but, in relation to such a repayment of tax, the material date for the purposes of this section is—

[F13 (a) the date when the entitlement to relief in respect of the repayment accrued, that is to say—

(i) where the repayment [F14 , or the release or writing off,] of the loan or advance (or part thereof) occurred on or after the day mentioned in section 419(4A), the date nine months after the end of that accounting period; and

(ii) in any other case, the date nine months after the end of the accounting period in which the loan or advance was made;

or]

(b) if it is later, the date on which the tax which is to be repaid was in fact paid.

(5) Interest paid under this section—

[F15 (a)] shall be paid without any deduction of income tax and

[F16 (b)] [F17 subject to subsection (5A) below,] shall not be brought into account in computing any profits or income.

[F18 (5A) Paragraph (b) of subsection (5) above does not apply in relation to interest payable to a company within the charge to corporation tax.]

(6) Where a repayment of corporation tax is a repayment of tax paid by a company on different dates, the repayment shall so far as possible be treated for the purposes of this section as a repayment of tax paid on a later rather than an earlier date among those dates.

(7) F19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F20 F21 (7A) In any case where—

(a) a company carrying on a trade incurs a loss in the trade in an accounting period (“the later period”),

(b) as a result of a claim under section 393A(1), the whole or any part of that loss is set off for the purposes of corporation tax against profits (of whatever description) of an earlier accounting period (“the earlier period”) which does not fall wholly within the period of twelve months immediately preceding the later period, and

(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that accounting period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of [F22 so much of the amount of that repayment as falls to be made]] as a result of the claim under section 393A(1), except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, [F23 as mentioned in subsection (7D) below].

[F20 (7AA) F24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

F25 (7B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F26 (7BB) Subject to subsection (7BC) below, in any case where—

(a) within the meaning of section 806D, any relievable underlying tax or relievable withholding tax arises in an accounting period of a company (“the later period”),

(b) pursuant to a claim under section 806G, the whole or any part of that tax is treated as mentioned in section 806D(4)(c) or (5)(c) in relation to the single related dividend or the single unrelated dividend arising in an earlier accounting period (“the earlier period”), and

(c) a repayment falls to be made of corporation tax paid for the earlier period or of income tax in respect of a payment received by the company in that period,

then, in determining the amount of interest (if any) payable under this section on the repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of the claim under section 806G, except so far as concerns interest for any time after the date on which any corporation tax for the later period became due and payable (as mentioned in subsection (7D) below).

(7BC) Where, in a case falling within subsection (7A)(a) and (b) above—

(a) as a result of the claim under section 393A(1), an amount or increased amount of eligible unrelieved foreign tax arises for the purposes of section 806A(1), and

(b) pursuant to a claim under section 806G, the whole or any part of an amount of relievable underlying tax or relievable withholding tax is treated as mentioned in section 806D(4)(c) or (5)(c) in relation to the single related dividend or the single unrelated dividend arising in an accounting period before the earlier period,

then subsection (7BB) above shall have effect in relation to the claim under section 806G as if the reference in the words after paragraph (c) to the later period within the meaning of that subsection were a reference to the period which, in relation to the claim under section 393A(1), would be the later period for the purposes of subsection (7A) above.]

[F27 (7C) In a case where—

(a) there is for an accounting period of a company (“the later period”) [F28 a non-trading deficit on the company’s loan relationships,]

(b) as a result of a claim under [F29 section 83(2)(c) of the Finance Act 1996 or paragraph 4(3) of Schedule 11 to that Act the whole or part of the deficit for the later period is set off against profits] of an earlier accounting period (“the earlier period”), and

(c) a repayment falls to be made of corporation tax for the earlier period [F30 or of income tax in respect of a payment received by the company in that accounting period],

then, in determining the amount of interest (if any) payable under this section on the [F31 repayment referred to in paragraph (c) above, no account shall be taken of so much of the amount of the repayment as falls to be made as a result of] the claim under [F32 section 83(2)(c) of that Act or, as the case may be, paragraph 4(3) of Schedule 11 to that Act] except so far as concerns interest for any time after the date on which any corporation tax for the later period became (or, as the case may be, would have become) due and payable, [F23 as mentioned in subsection (7D) below].]

[F33 F34 (7CA )(. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .)]

[F35 (7D) In subsections (7), (7A), (7B) [F36 , (7BB)] and (7C) above, any reference to the date on which corporation tax for an accounting period became, or would have become, due and payable shall be construed on the basis that corporation tax for an accounting period becomes due and payable on the day following the expiry of nine months from the end of the accounting period.]

[F37 (7E) The power conferred by section 59E of the Management Act (alteration of date on which corporation tax becomes due and payable) does not include power to make provision in relation to subsection (7), (7A), (7B), [F38 (7BB),] (7C) or (7D) above the effect of which would be to change the meaning of references in subsection (7), (7A), (7B) [F38 , (7BB)] or (7C) above to the date on which corporation tax for an accounting period became, or would have become, due and payable (as mentioned in subsection (7D) above).]

(8) In consequence of the preceding provisions of this section, no repayment supplement (within the meaning of section 825) shall be paid in respect of any repayment of tax or payment of tax credit where the relevant accounting period (within the meaning of that section) ends after the appointed day.

[F39 (8A) Where—

(a) interest has been paid to a company under subsection (1)(a) [F40 or (d)][F41 or (e)] above,

[F42 (b) there is—

(i) a change in the company’s assessed liability to corporation tax, or

(ii) a change in the amount of the R&D tax credit [F43 , land remediation tax credit or life assurance company tax credit] payable to the company (which does not result in a change falling within sub-paragraph (i)),

other than a change which in whole or in part corrects an error made by the Board or an officer of the Board, and]

(c) as a result only of that change (and, in particular, not as a result of any error in the calculation of the interest), it appears to an officer of the Board that the interest ought not to have been paid, either at all or to any extent,

the interest that ought not to have been paid may be recovered from the company as if it were interest charged under Part IX of the Management Act (interest on overdue tax).

(8B) For the purposes of subsection (8A) above, the cases where there is a change in a company’s assessed liability to corporation tax are those cases where—

(a) an assessment, or an amendment of an assessment, of the amount of corporation tax payable by the company for the accounting period in question is made, or

(b) a determination of that amount is made under paragraph 36 or 37 of Schedule 18 to the Finance Act 1998 (which until superseded by a self-assessment under that Schedule has effect as if it were one),

whether or not any previous assessment or determination has been made.

[F44 (8BA) For the purposes of subsection (8A)(b) above, the cases where there is a change in the amount of the R&D tax credit [F45 , the land remediation tax credit or the life assurance company tax credit] payable to the company are those cases where an assessment, or an amendment to an assessment, is made to recover an amount of R&D tax credit [F46 , land remediation tax credit or life assurance company tax credit] paid to the company for the accounting period in question.]

(8C) In subsection (8A)(b) above “error” includes—

(a) any computational error; and

(b) the allowance of a claim or election which ought not to have been allowed.]

(9) In this section “the appointed day” means such day or days, not being earlier than 31st March 1992, as the Treasury may by order appoint for the purposes of this section.

Subordinate Legislation Made

P1 S. 826(1)(8)(9) power exercised: 30.9.1993 appointed by S.I. 1992/3066, art. 2(2)(b)

Textual Amendments

F1 S. 826(1)(aa) inserted (3.5.1994) by Finance Act 1994 (c. 9), Sch. 16 para. 20(2)

F2 S. 826(1)(d) and preceding word inserted (with effect in accordance with s. 69(1) of the amending Act) by Finance Act 2000 (c. 17), Sch. 21 para. 1(2)

F3 S. 826(1)(e) and preceding word inserted (with effect in accordance with s. 70(1) of the amending Act) by Finance Act 2001 (c. 9), Sch. 23 para. 3(2)

F4 Words in s. 826(1) substituted (retrospectively) by Finance Act 1989 (c. 26), s. 180(6)(7)

F5 Words in s. 826(2) inserted (31.7.1998) by Finance Act 1998 (c. 36), Sch. 4 para. 1(1)

F6 Words in s. 826(2) substituted (with effect in accordance with s. 199(2) of the amending Act) by Finance Act 1994 (c. 9), Sch. 19 para. 42; S.I. 1998/3173, art. 2

F7 S. 826(2A) inserted (3.5.1994) by Finance Act 1994 (c. 9), Sch. 16 para. 20(3)

F8 S. 826(2A) repealed (with effect in accordance with Sch. 3 para. 38(5) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 38(2), Sch. 27 Pt. 3(2), Note

F9 Words in s. 826(3) substituted (with effect in accordance with Sch. 4 para. 2(2) of the amending Act) by Finance Act 1998 (c. 36), Sch. 4 para. 2(1)

F10 S. 826(3A) inserted (with effect in accordance with s. 69(1) of the amending Act) by Finance Act 2000 (c. 17), Sch. 21 para. 1(3)

F11 S. 826(3B) inserted (with effect in accordance with s. 70(1) of the amending Act) by Finance Act 2001 (c. 9), Sch. 23 para. 3(3)

F12 Words in s. 826(4) substituted (with effect in accordance with s. 90(2) of the amending Act) by Finance Act 1999 (c. 16), s. 90(1)(a)

F13 S. 826(4)(a) substituted (with effect in accordance with s. 173(6) of the amending Act) by Finance Act 1996 (c. 8), s. 173(5)

F14 Words in s. 826(4)(a)(i) inserted (with effect in accordance with s. 90(2) of the amending Act) by Finance Act 1999 (c. 16), s. 90(1)(b)

F15 Words in s. 826(5) re-numbered as s. 826(5)(a) (31.7.1998) by virtue of Finance Act 1998 (c. 36), s. 34(2)(a)

F16 Words in s. 826(5) re-numbered as s. 826(5)(b) (31.7.1998) by virtue of Finance Act 1998 (c. 36), s. 34(2)(b)

F17 Words in s. 826(5)(b) inserted (with effect in accordance with s. 34(5) of the amending Act) by Finance Act 1998 (c. 36), s. 34(3)

F18 S. 826(5A) inserted (with effect in accordance with s. 34(5) of the amending Act) by Finance Act 1998 (c. 36), s. 34(4)

F19 S. 826(7) repealed (with effect in accordance with Sch. 3 para. 38(6) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 38(3), Sch. 27 Pt. 3(2), Note

F20 S. 826(7AA) inserted (27.7.1993) by 1993 c. 34, s. 120, Sch. 14 para. 10(3)(5)

F21 S. 826(7A)(7B) inserted by Finance Act 1991 (c. 31, SIF 63:1), s. 73(3)(4)(5), Sch. 15 para. 23

F22 Words in s. 826(7A) substituted (27.7.1993) by 1993 c. 34, s. 120, Sch. 14 para. 10(2)

F23 Words in s. 826(7)(7A)(7B)(7C) substituted (with effect in accordance with Sch. 4 para. 5(5)(6) of the amending Act) by Finance Act 1998 (c. 36), Sch. 4 para. 5(2)

F24 S. 826(7AA)(7CA) repealed (with effect in accordance with Sch. 3 para. 38(7) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 38(4), Sch. 27 Pt. 3(2), Note

F25 S. 826(7B) repealed (with effect in accordance with s. 20 of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 8 Pt. 2(4), Note

F26 S. 826(7BB)(7BC) inserted (28.7.2000) by Finance Act 2000 (c. 17), Sch. 30 para. 29(2)

F27 S. 826(7C) inserted (27.7.1993) by 1993 c. 34, s. 170, Sch. 18 para.5

F28 Words in s. 826(7C)(a) substituted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 48(1)(a) (with Sch. 15)

F29 Words in s. 826(7C)(b) substituted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 48(1)(b) (with Sch. 15)

F30 Words in s. 826(7C)(c) inserted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 24 para. 11(a)

F31 Words in s. 826(7C) substituted (1.5.1995) by Finance Act 1995 (c. 4), Sch. 24 para. 11(b)

F32 Words in s. 826(7C) substituted (with effect in accordance with s. 105(1) of the amending Act) by Finance Act 1996 (c. 8), Sch. 14 para. 48(1)(c) (with Sch. 15)

F33 S. 826(7CA) inserted (with effect in accordance with Sch. 24 para. 12(4)(5) of the amending Act) by Finance Act 1995 (c. 4), Sch. 24 para. 12(2)

F34 S. 826(7AA)(7CA) repealed (with effect in accordance with Sch. 3 para. 38(7) of the repealing Act) by Finance Act 1998 (c. 36), Sch. 3 para. 38(4), Sch. 27 Pt. 3(2), Note

F35 S. 826(7D) inserted (with effect in accordance with Sch. 4 para. 5(5)(6) of the amending Act) by Finance Act 1998 (c. 36), Sch. 4 para. 5(3)

F36 Words in s. 826(7D) inserted (28.7.2000) by Finance Act 2000 (c. 17), Sch. 30 para. 29(3)

F37 S. 826(7E) inserted (with effect in accordance with Sch. 4 para. 5(5)(6) of the amending Act) by Finance Act 1998 (c. 36), Sch. 4 para. 5(4)

F38 Words in s. 826(7E) inserted (28.7.2000) by virtue of Finance Act 2000 (c. 17), Sch. 30 para. 29(4)

F39 S. 826(8A)-(8C) inserted (with effect in accordance with Sch. 4 para. 3(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 4 para. 3(1)

F40 Words in s. 826(8A)(a) inserted (with effect in accordance with s. 69(1) of the amending Act) by Finance Act 2000 (c. 17), Sch. 21 para. 1(4)(a)

F41 Words in s. 826(8A)(a) inserted (with effect in accordance with s. 70(1) of the amending Act) by Finance Act 2001 (c. 9), Sch. 23 para. 3(4)(a)

F42 S. 826(8A)(b) substituted (with effect in accordance with s. 69(1) of the amending Act) by Finance Act 2000 (c. 17), Sch. 21 para. 1(4)(b)

F43 Words in s. 826(8A)(b)(ii) inserted (with effect in accordance with s. 70(1) of the amending Act) by Finance Act 2001 (c. 9), Sch. 23 para. 3(4)(b)

F44 S. 826(8BA) inserted (with effect in accordance with s. 69(1) of the amending Act) by Finance Act 2000 (c. 17), Sch. 21 para. 1(5)

F45 Words in s. 826(8BA) inserted (with effect in accordance with s. 70(1) of the amending Act) by Finance Act 2001 (c. 9), Sch. 23 para. 3(5)(a)

F46 Words in s. 826(8BA) inserted (with effect in accordance with s. 70(1) of the amending Act) by Finance Act 2001 (c. 9), Sch. 23 para. 3(5)(b)

Modifications etc. (not altering text)

C1 S. 826 excluded (2.1.1996) by The Lloyd's Underwriters (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1995 (S.I. 1995/3225), reg. 12(2) (with reg. 13)

C2 S. 826 applied (with modifications) (7.1.1999 in accordance with reg. 1(2) of the affecting S.I.) by The Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175), reg. 8 (as amended by: S.I. 2005/889, regs. 1(1)(3), 7; S.I. 2011/1785, regs. 1, 11; S.I. 2017/1072, regs. 1, 10)

Marginal Citations

M1 Source—1987 (No.2) s.87

M2 1998 c. 36.