Finance (No.2) Act 1987

88Recovery of overpayment of tax etc.

(1)In section 30 of the Management Act (recovery of overpayment of tax etc.) after subsection (2) there shall be inserted the following subsection—

“(2A)In any case where—

(a)interest has been paid under section 87 of the Finance (No. 2) Act 1987 on a repayment of tax, and

(b)the whole or any part of that repayment has been paid to any person but ought not to have been paid to him, and

(c)interest ought not to have been paid on that repayment, either at all or to any extent,

then the amount of the repayment assessed under subsection (1) above may include an amount equal to the interest that ought not to have been paid.”

(2)After subsection (3) of that section there shall be inserted the following subsection—

“(3A)If, in a case not falling within subsection (2A) above,—

(a)interest has been paid under section 87 of the Finance (No. 2) Act 1987 on a repayment of tax, and

(b)that interest ought not to have been paid, either at all or to any extent,

then an amount equal to the interest that ought not to have been paid may be assessed and recovered as if it were unpaid corporation tax.”

(3)At the end of subsection (4) of that section there shall be added the words “and an assessment to recover—

(a)an amount of corporation tax repaid to a company in respect of an accounting period, or

(b)an amount of income tax repaid to a company in respect of a payment received by the company in any accounting period, or

(c)interest on any such repayment of tax,

shall be treated as an assessment to corporation tax for the accounting period referred to in paragraph (a) or (b) above, as the case may be, and the sum assessed shall carry interest at the prescribed rate for the purposes of section 87A of this Act from the date when the payment being recovered was made until payment.”

(4)After subsection (4) of that section there shall be inserted the following subsection—

“(4A)Where an assessment is made under this section to recover—

(a)corporation tax repaid to a company in respect of an accounting period, or

(b)income tax repaid to a company in respect of payments received by the company in an accounting period,

and more than one repayment of that tax has been made in respect of that period, any sum recovered in respect of income tax or corporation tax repaid shall as far as possible be treated as relating to a repayment of that tax made later rather than to a repayment made earlier.”

(5)In section 102 of the [1972 c. 41.] Finance Act 1972 (rectification of excessive set-off etc. of advance corporation tax or tax credit) after subsection (1) there shall be inserted the following subsections—

“(1A)In any case where—

(a)interest has been paid under section 87 of the Finance (No. 2) Act 1987 on a payment of tax credit, and

(b)interest ought not to have been paid on that payment, either at all or to any extent,

an assessment under this section may be made for recovering any interest that ought not to have been paid.

(1B)Where—

(a)an assessment is made under this section to recover tax credit paid to a company in respect of franked investment income received by the company in an accounting period, and

(b)more than one payment of tax credit has been made in respect of that period,

any sum recovered shall as far as possible be treated as relating to a payment of tax credit made later rather than to a payment made earlier.”

(6)In subsection (2) of that section after the words “tax credit” there shall be inserted “or interest on such a payment”.

(7)Subsections (1) to (4) above have effect with respect to the recovery of—

(a)repayments of corporation tax paid for accounting periods ending after the appointed day,

(b)repayments of income tax on payments received by a company in any such accounting period, and

(c)interest on such repayments;

and subsections (5) and (6) above have effect with respect to the recovery of interest on payments of tax credit (within the meaning of Part V of the Finance Act 1972) claimed in respect of accounting periods ending after the appointed day.