Taxes Consolidation Act 1997 section 1081

Effect on interest of reliefs given by discharge or repayment

Section 1081 provides for the adjustment of interest on overdue tax where a tax liability is subsequently discharged or repaid.

• Where a tax assessment is discharged (e.g. following a relief), any interest already paid on that tax must be recalculated and any overpaid interest refunded.
• Where tax is repaid, the taxpayer may elect to have the repayment treated as a discharge of tax charged by another assessment for the same period, potentially reducing interest on that other assessment.
• Where some tax was paid on time and other tax was paid late with interest, the taxpayer may direct the repayment against the late-paid tax, thereby reducing the interest liability.
• Relief from one type of tax (income tax, corporation tax or capital gains tax) can only affect interest on an assessment to that same type of tax.