Corporation Tax Act 2010 section 357YO

Duty to deduct tax from payments of restitution interest

Section 357YO requires HMRC to deduct tax at source when paying restitution interest to a company, where the interest arises from a claim relating to tax paid under a mistake of law or unlawfully collected, and the interest goes beyond simple statutory interest.

• HMRC must withhold corporation tax at the restitution payments rate of 45% from any restitution interest payment, applied to the gross amount before deduction
• Two conditions must be met: the interest must relate to a company's restitution claim concerning tax paid under a mistake of law or unlawfully collected (Condition 1), and the interest must not be limited to simple interest at a statutory rate (Condition 2)
• On making the payment, HMRC must provide the company with a written notice showing the gross payment amount and the amount of tax deducted
• The withholding obligation applies regardless of whether the payment arises from a court judgment, an interim court payment, a settlement agreement, or any other circumstances