HMRC is expecting to bring an additional £270m of corporation tax (CT) in 2015/16 as a result of the decision to apply a special 45% rate rather than the standard 20% to restitution interest, according to the small print of documents released alongside last week’s Autumn Statement
This measure was legislated for in Finance (No. 2) Act 2015 and came into effect on or after 21 October 2015. The withholding obligation has effect from 26 October 2015.
Now the policy costings released with the autumn statement show the Treasury expects to raise £270m this year as a result. Future projections suggest lower amounts of £55m in 2016/17 and 2017/18, rising to an estimated £115m in 2020/21, by which point the 45% rate is likely to have brought in £670m.
HMRC’s decision to impose a special 45% rate of CT on restitution interest follows the Court of Appeal judgment in May which ruled that compound interest should be paid to catalogue company Littlewoods in a case involving overpaid VAT on agent sales dating back to 1973. As a result, HMRC is liable for the repayment of £1.2bn covering a 30 year period up to 2004, because of a misapplication of the law throughout the period.
