On 9 February Accountingweb published a news article concerning the reduction in the official rate of interest to 4.75%. That article refers to the interest rate applying to the calculation of the benefit charge on a loan from an employer at 6.25% where the interest is calculated on the averaging basis. However, I have just noticed on HMRC's helpsheet it states that the average official rate is 6.10%.
So which is correct?
Paula Sparrow
Replies (3)
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Looks like article is incorrect
Section 182 ITEPA 2003 (Step 2) states how to calculate the average rate when it changes during the year. Whoever wrote the article would be the only person who could explain the statement but the legislation is quite clear. The statutory instrument (SI 2009/199) makes no reference to the average rate and neither does the explanatory note. The explanatory leaflet on HMRC website at www.hmrc.gov.uk/si/2009-0199-em.pdf. (which I haven't read but may help)
6.1% is correct
Both the rates quoted (6.24% and 4.75%) are annual rates. As the rate changed with 36 days of the tax year remaining the average rate over the full year comes out at 6.1%.