Part 4: Income tax, corporation tax and capital gains tax Section 38: Restitution interest payments Details of the section Chapter 1
Chapter 1 contains sections 357YA to 357YJ which sets out the circumstances in which the new rate of corporation tax will apply and includes a targeted anti-avoidance rule.
	Section 357YA applies the charge to corporation tax to restitution interest.
	Section 357YB makes clear that profits of a company which consist of restitution interest will come within new Part 8C regardless of whether the profits are on revenue or capital account.
	Section 357YC sets out three conditions (Conditions A - C) which, when all are met, define which payments constitute restitution interest. Condition A requires that there must be a payment by HMRC in relation to a Common Law claim for interest that relates to the payment of tax made under a mistake of law or the unlawful collection of tax. Condition B requires that the claim must either have been finally determined, or settled by agreement between HMRC and the company. A claim is finally determined where there is a determination by a Court, and that determination cannot be varied on appeal. Condition C is that the interest is not statutory interest payable under a statutory provision for purposes relating to taxation. The definition of interest includes an amount which is equivalent to interest. That is defined as being an amount which is determined by reference to the time value of money.
	Section 357YD explains that interest that has been paid as statutory interest before the date of the final judgment or settlement will not fall within the definition of restitution interest. However, this does not prevent an award of interest calculated by reference to simple interest at a statutory rate from falling within the definition of restitution interest.
	Section 357YE and section 357YF confirm that the principles of generally accepted accounting practice apply for the purposes of determining the accounting period in which this interest arises.
	Section 357YG makes provision for the consequences where a judgment in favour of a company is reversed on a late appeal, with the effect that HMRC are no longer required to make any payment. In that situation, HMRC is not required to repay any tax it may have deducted from any payment when first made, and the payment does not rank as a payment of corporation tax by the claimant.
	Sections 357YH - 357YJ set out a targeted anti-avoidance rule to counteract relevant avoidance arrangements where the main purpose or one of the main purposes of the arrangement is to obtain a tax advantage.
	Section 357YH provides that any restitution related tax advantage which arises from relevant avoidance arrangements is to be counteracted by the making of just and reasonable adjustments.
	Section 357YI interprets what is meant by relevant avoidance arrangements, but excludes commercial arrangements from that definition.
	Section 357YJ sets out some examples which would not be considered to be commercial arrangements, such as delaying the recognition of the restitution interest or treating the receipt of the interest in a different way than it would have been in the absence of the arrangements.