As the companies won their cases in the courts it became clear that very substantial amounts of interest could be payable on the tax refunds they were entitled to receive. This would not be ordinary statutory interest calculated on a simple basis but ‘restitution interest’ calculated on a compound basis which requires HMRC to give up the financial benefits they received because of the overpayment of tax.
HMRC has announced that these payments of restitution interest will be subject to corporation tax at the new rate of 45%. In view of the size of the repayments and the substantial amounts of restitution interest view it’s perhaps not surprising that HMRC is attempting in its own words ‘to reduce losses from litigation if HMRC were to be unsuccessful’. HMRC will publish its estimates of the amount of corporation tax this will yield with the Autumn Statement on 25...
