Beneficial loan interest rate

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The recent reductions in base rate by the bank of England have been reflected in the rates of interest charged and paid by HMRC on tax paid late or overpaid. The tax authority even changed the mechanism by which interest rates were set earlier this year, so that tax interest rates could follow the bank base rate down more swiftly. This change was accompanied by a further amendment designed to ensure that rates could not turn negative otherwise HMRC would be charging us interest for paying our tax early!

There was also an announcement about the official rate of interest on beneficial loans. This is to be reduced with effect from 1 March 2009 to a rate of 4.75%. The current rate is 6.25%. This reduction is of course welcome, but it hardly reflects reality. If a company makes a loan of more t...

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Seems unfair....
"The tax authority even changed the mechanism by which interest rates were set earlier this year, so that tax interest rates could follow the bank base rate down more swiftly."

Clearly this is not happening. Does anyone know how the tax authority decides on the offiical rate of interest?

The official rate of interest has been 6.25% since 6 April 2007 and HMRC announced the rate would be frozen for 2008/2009 "subject to review in the event of significant rate changes" So from 1 March 2009 it is 4.75%.

The base rate has plummeted from 5.75% in July 2007 to 1% this month. It is clear there has been significant rate changes - but the same cannot be said for the change to the official rate of interest

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