The Treasury has made the Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2025 (SI 2025/1253), laid before the House of Commons on 1 December 2025 under section 357YW(7) CTA 2010. The instrument comes into force on 15 January 2026, subject to approval by resolution of the House of Commons within 28 days. Part 8C is the regime that charges restitution interest paid by HMRC at a ring‑fenced corporation tax rate of 45 percent.
The Regulations narrow the scope of what counts as “restitution interest”. They insert wording across sections 357YC, 357YD and 357YO so that awards limited to simple interest “at a rate equivalent to or lower than a statutory rate” fall outside Part 8C. In practical terms, payments capped at a statutory tax‑related rate will not be taxed at 45 percent under Part 8C.
A parallel administrative change extends the time available to assess restitution interest where a case concludes late. A new subsection 357YQ(1A) allows an assessment to be made by the later of two dates: up to two years after the end of the accounting period in which Condition B is met, or within any other time limit that would otherwise apply under the Taxes Acts.
Condition B-referred to in the new time‑limit rule-captures the point at which a claim is finally determined, either by a court’s final decision that HMRC is liable to pay the interest or by a final settlement agreement between HMRC and the company. This ensures the assessment clock can start from the actual legal conclusion of the dispute.
The statutory‑rate carve‑out hinges on the definition in CTA 2010 section 357YU(2), which treats a statutory rate as one set for tax purposes in or under an Act of Parliament. By focusing Part 8C on interest exceeding that statutory benchmark, the Regulations align the 45 percent charge with the policy focus on above‑statutory, typically compound, restitution awards.
The duty on HMRC to withhold 45 percent at source from in‑scope payments (section 357YO) remains. Where a payment includes components, the government’s policy material confirms that an overall award that exceeds what would be due at a statutory rate remains within Part 8C even if part of it was calculated as simple interest at or below the statutory rate.
HMRC’s published material indicates the measure is clarificatory and is not expected to raise revenue. It estimates a negligible impact, affecting around 50 to 60 company groups-principally those with long‑running restitution litigation-by confirming that simple‑interest awards at statutory‑equivalent rates are outside the 45 percent regime.
For finance directors and tax teams, the immediate task is to separate any expected or received interest into components: amounts limited to a statutory rate, and any element above that level. Only the latter is within Part 8C and subject to the 45 percent ring‑fenced charge without reliefs or set‑offs under section 357YL; the remainder is taxed under the ordinary corporation tax rules.
Timing now matters more for open cases. The new assessment window ties to the accounting period in which the litigation or settlement reaches a final determination under Condition B. Companies should record that accounting period precisely and check whether normal assessment time limits had already expired, as the Regulations now provide a later alternative two‑year limit in those circumstances.
The instrument was signed by two of the Lords Commissioners of His Majesty’s Treasury and includes an Explanatory Note stating that a Tax Information and Impact Note will be published on GOV.UK. HMRC has already issued policy and guidance pages explaining the Part 8C framework, including the 45 percent rate and filing via CT600K for in‑scope amounts.