The Inheritance Tax and Capital Transfer Tax (Interest on Unpaid Tax) Order 1989

Explanatory Note

(This note is not part of the Order)

This Order increases with effect from 6th July 1989 the annual rate of interest on unpaid inheritance tax, or unpaid capital transfer tax where the liability to tax arose before25th July 1986, payable under section 233 of the Inheritance Tax Act 1984 (formerly the Capital Transfer Tax Act 1984). The annual rate is increased to 11 per cent. This increase also has effect in relation to repayments of capital transfer tax or inheritance tax since, by virtue of section 235 of the Act, these carry interest at the rate applicable to unpaid tax under section 233. Section 236 of the Act, as amended by paragraph 33 of Schedule 19 to the Finance Act 1986, Part X of Schedule 23 to the Finance Act 1986 and Part X of Schedule 14 to the Finance Act 1988 (c. 39), applies the provisions of section 233 to certain special cases where tax has been overpaid or underpaid.

The previous rates were 9 per cent. with effect from 6th October 1988 (S.I. 1988/1623), 8 per cent. with effect from 6th August 1988 (S.I. 1988/1280), 6 per cent. with effect from 6th June 1987 (S.I. 1987/887) and 8 per cent. with effect from 16th December 1986 (S.I. 1986/1944). Immediately before 16th December 1986 rates of 9 per cent. and 11 per cent. applied with respect to transfers of value made and other events occurring after17th March 1986 by section 233(2) (as amended by paragraph 32 of Schedule 19 to the Finance Act 1986) and originally in relation to capital transfer tax by S.I. 1985/560 with effect from 1st May 1985. Prior to this date the rates were 6 per cent. and 8 per cent. respectively with effect from 1st December 1982 (S.I. 1982/1585), 9 per cent. and 12 per cent. respectively with effect from 1st January 1980 (S.I. 1979/1688), and 6 per cent. and 9 per cent. respectively prior to 1st January 1980 (paragraph 19 of Schedule 4 to the Finance Act 1975 (c. 7)).