The Finance Bill 2015 includes a new amendment which would see the imposition of a 45% corporation tax charge on restitution interest paid to companies by HMRC. The charge specifically applies to restitution interest the calculation of which is not limited to simple interest at the statutory rate. The novelty of this proposed charge is found in the fact that it creates an entirely new ring-fenced system of taxation with a significantly higher corporation tax rate. The proposed charge will apply to interest either agreed between HMRC and companies or interest awarded in a final judgment by a court. The tax will be applied in the year of income where, in accordance with GAAP, the interest was recorded (or ought to have been recorded) in the company’s accounts. It will be retained at source (withholding tax) by HMRC when making the payment of the restitution interest to the company.
The measures will take effect upon the Bill being given Royal Assent (although certain anti-avoidance measures take effect from 21 October 2015).
