Rates of interest

Question proposed, That the clause stand part of the Bill.

I rise not merely to note that we have managed to make it into triple figures, but to ask the Minister a question that relates to the issue of differential rates that I raised under clause 100. As I understand it, those who owe money to HMRC pay a higher rate of interest than HMRC pays taxpayers to whom it owes money. Does the Minister have any figures on the benefit to the Exchequer of those differential rates? What is the policy on interest rates here? In a period in which interest rates are low, has any consideration been given to setting a minimum interest rate for taxpayers owed sums of money, and where does the Exchequer Secretary see the policy on interest rates going forward?

The clause is a further part of the package of provisions that will create a new harmonised interest rate regime. It creates the vires for secondary legislation to be made that will set the rates of interest to be charged and paid under the new regime. Regulations will provide for a harmonised interest rate that is aligned across the taxes and offers both transparency and consistency in approach. Government estimates of the potential difference between what is currently charged and paid and future amounts under the new regimes show a negligible difference in the years scored until 2012-13. The aim is not to raise revenue but to offer a regime that is based on recompense, fairness and simplicity.

The regulations will also provide for rates that will apply to interest charged on late-paid taxes and paid on overpayments. The rates themselves will track all changes in the Bank of England base rate, with one rate charged on late-paid taxes and a further rate paid on overpayments. Rate changes will apply 13 days after any rate changes announced by the Monetary Policy Committee, to allow for systems to be updated with the new rate. The two rates will apply to all taxes with the exception of those companies paying under the quarterly instalment payments arrangements, which will continue to have their own rates. Basing the harmonised interest rates on the Bank of England base rate was warmly welcomed by respondents to the consultation process as it offered a transparent basis for setting the rate that could be clearly understood by taxpayers. Regulations will also provide for the setting of a repayment interest floor of 0.5 per cent. That is intended to ensure that even when the Bank of England base rate reaches zero, the rate of repayment interest paid by HMRC will never reach zero.

The Government also intend to make regulations under existing powers that mirror the new harmonised rates, following Royal Assent, in order to align existing rates until full harmonisation of the regimes begins. The clause forms an important part of the provisions needed to introduce a new harmonised interest regime that will bring benefits to taxpayers, their advisers and  HMRC. The clause itself will provide for rates that are set in a transparent way, are clearly based on recompense and are fair and simple to understand.

Question put and agreed to.

Clause 102 accordingly ordered to stand part of the Bill.

Clause 103 ordered to stand part of the Bill.