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( ) In the following provisions, for the words from the same rate to the end substitute the rate applicable under section 178 of the Finance Act 1989
(a) section 48(1) of FA 1975 (interest on repayment of estate duty), and
(b) section 235(1) of IHTA 1984 (interest on overpaid inheritance tax).
( ) In section 178(2) of FA 1989 (setting of rates of interest)
(a) after paragraph (g) insert
(ga) section 48(1) of the Finance Act 1975,, and
(b) in paragraph (k), after sections 233 insert , 235(1)..
This amendment and the clause to which it relates make changes to the existing interest regime, setting the scene for the long-term introduction of interest harmonisation. Subsections (1) to (3) bring the due dates for the withdrawal of any income tax relief under the enterprise investment scheme in line with the due date for income tax. The removal of that difference will provide greater consistency and certainty for taxpayers.
Amendment 307 introduces two new subsections to this clause after subsection (3). The amendment is required to ensure that interest is charged and paid on estate duty and inheritance tax at the same rates as interest for other taxes. We announced at Budget 2009 our intention to align interest rates where interest is currently charged and paid, with a differential between the rate charged and paid, after the Bill receives Royal Assent.
However, the existing legislation provides that repayment interest for inheritance taxes should be paid at the same rate as interest charged on late payments. The amendment removes that anomaly and will ensure that rates charged and paid can be harmonised across taxes. Those responding to the consultation on the new interest harmonisation proposals were in favour of harmonising rates across taxes and the majority also recognised the need to have a differential between the rate charged and paid.
These changes reflect the same principles used for interest harmonisation and as such provide recompense, fairness and simplicity. I urge the Committee to accept the amendment.