Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of the extent to which late-payment interest on Corporation Tax arises (1) from differences between estimated and final tax liabilities, including in businesses with complex or evolving tax positions such as those undertaking significant investment or research and development activity, or (2) from late payment behaviour; and what steps they are taking to ensure that the application of such interest does not have disproportionate impacts on particular types of business.

HMRC does not routinely collect or publish data on the extent to which Corporation Tax late-payment interest arises from differences between estimated and final tax liabilities, as opposed to late payment behaviour. No specific assessment has therefore been made of the relative contribution of these factors.

Interest on tax paid late is not a penalty but rather designed to both compensate the Exchequer for late payment and to provide a measure of fairness to those taxpayers that pay what is due on time.

The Government recognises that some businesses may face greater uncertainty when estimating their final Corporation Tax liability. The Corporation Tax regime has nevertheless operated successfully for many years using broadly consistent interest rules.

HMRC keeps all aspects of the tax administration framework under review. In doing so, it is mindful of the need to avoid unnecessary complexity and to ensure that rules work effectively across the wide range of businesses that make up the Corporation Tax population. HMRC has not identified evidence that introducing different late-payment interest regimes for particular sectors, activities or business types would improve fairness or deliver better overall outcomes. The Government therefore continues to apply a broadly consistent approach across taxpayers while keeping the operation of the regime under review.