INCOME TAX Citation and commencement 1 These Regulations may be cited as the Taxes (Interest Rate) Regulations 1989 and shall come into force on 18th August 1989. Interpretation 2 1 In these Regulations unless the context otherwise requires– “established rate” means– on the coming into force of these Regulations, 14 per cent. per annum; and in relation to any date after the first reference date after the coming into force of these Regulations, the reference rate found on the immediately preceding reference date; “operative date” means the sixth day of each month; “reference date” means the day of each month which is the twelfth working day before the sixth day of the following month; “section 178” means section 178 of the Finance Act 1989; “working day” means any day other than a non-business day within the meaning of section 92 of the Bills of Exchange Act 1882 . 2 In these Regulations the reference rate found on a reference date is the percentage per annum found by averaging the base lending rates at close of business on that date of– a Bank of Scotland, b Barclays Bank p.l.c., c Lloyds Bank p.l.c., d Midland Bank p.l.c., e National Westminster Bank p.l.c., and f The Royal Bank of Scotland p.l.c., and, if the result is not a whole number, rounding the result to the nearest such number, with any result midway between two whole numbers rounded down. Applicable rate of interest on unpaid tax, tax repaid and repayment supplement 3 1 For the purposes of– a sections 86, 86A, 87 and 88 of the Taxes Management Act 1970 , b paragraph 3 of Schedule 16A to the Finance Act 1973 ; c paragraphs 15 and 16 of Schedule 2, and paragraph 8 of Schedule 5, to the Oil Taxation Act 1975 , d section 47 of the Finance ( No. 2) Act 1975 , e paragraph 59 of Schedule 8 to the Development Land Tax Act 1976 , f section 92 of the Finance Act 1986 , and g sections 824 and 825 of, and paragraph 3 of Schedule 19A to, the Income and Corporation Taxes Act 1988 , the rate applicable under section 178 shall, subject to paragraph (2), be 12.25 per cent. per annum. 2 Where, on a reference date after the coming into force of these Regulations, the reference rate found on that date differs from the established rate, the rate applicable under section 178 for the purposes of the enactments referred to in paragraph (1) shall, on and after the next operative date, be the percentage per annum found by applying the formula specified in paragraph (3) and, if the result is not a multiple of one-quarter, rounding the result down to the nearest amount which is such a multiple. 3 The formula specified in this paragraph is– ( RR + 2.5 ) ( 100 - BR ) , 100 where RR is the reference rate referred to in paragraph (2) and BR is the percentage at which income tax at the basic rate is charged for the year of assessment in which the reference date referred to in that paragraph falls. Applicable rate of interest on unpaid inheritance tax, capital transfer tax and estate duty 4 1 For the purposes of– a section 8(9) of the Finance Act 1894 , b section 18 of the Finance Act 1896 , c section 61(5) of the Finance Act (1909–10) Act 1910 , d section 17(3) of the Law of Property Act 1925 , e section 73(6) of the Land Registration Act 1925 , and f sections 233 and 236(3) and (4) of the Inheritance Tax Act 1984 , the rate applicable under section 178 shall, subject to paragraph (2), be 11 per cent. per annum. 2 Where, on a reference date after the coming into force of these Regulations, the reference rate found on that date differs from the established rate, the rate applicable under section 178 for the purposes of the enactments referred to in paragraph (1) shall, on and after the next operative date, be the percentage per annum found by applying the formula specified in paragraph (3) and, if the result is not a whole number, rounding the result down to the nearest such number. 3 The formula specified in this paragraph is– ( RR + 2 ) ( 100 - BR ) 100 - 1 , where RR is the reference rate referred to in paragraph (2) and BR is the percentage at which income tax at the basic rate is charged for the year of assessment in which the reference date referred to in that paragraph falls. Applicable rate of official rate of interest 5 1 For the purpose of section 160 of the Income and Corporation Taxes Act 1988 the rate applicable under section 178 shall, subject to paragraph (2), be 15.5 per cent. per annum. 2 Where, on a reference date after the coming into force of these Regulations, the reference rate found on that date differs from the established rate, the rate applicable under section 178 for the purpose of section 160 of the Income and Corporation Taxes Act 1988, shall, on and after the next operative date, be the percentage per annum found by applying the formula specified in paragraph (3). 3 The formula specified in this paragraph is– RR + 1.5, where RR is the reference rate referred to in paragraph (2). Effect of change in applicable rate 6 Where the rate applicable under section 178 for the purpose of any of the enactments referred to in regulation 3(1), 4(1) or 5(1) changes on an operative date by virtue of these Regulations, that change shall have effect for periods beginning on or after the operative date in relation to interest running from before that date as well as from or from after that date. Kenneth Carlisle David Lightbown Two of the Lords Commissioners of Her Majesty’s Treasury 27th July 1989