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You are here: BAILII >> Databases >> Scottish Law Commission >> Scottish Law Commission (Discussion Papers) >> Interest on Debt & Damages [2005] SLC 127(appendix b) (DP) (January 2005) URL: http://www.bailii.org/scot/other/SLC/DP/2005/127(appendix_b).html Cite as: [2005] SLC 127(appendix b) (DP)

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APPENDIX B

Statutory Provisions Creating Entitlement to Interest

The following is a summary of current statutory provisions which create an entitlement to interest on sums due by one person to another. It is not intended to be exhaustive, but is illustrative of the diversity of circumstances in which a statutory entitlement to interest may currently arise.

(i) Interest payable by one private individual to another (other than on decree or tribunal decision)

•    Bills of Exchange Act 1882 s 57 - Right of recovery where a bill is dishonoured, payable with interest from the time of presentment for payment. S 57(3) - Interest may be withheld "if justice require it".

•    Partnership Act 1890 s 24(3) – A partner making any advance "beyond the amount of capital which he has agreed to subscribe" is entitled to interest at 5% per annum. S 42(1) – Any outgoing partner is entitled to profits attributable to the use of their share, or interest on the share, of assets at 5% per annum.

•    Trusts (Scotland) Act 1921 s 29 - Where a sum is improperly advanced on an inadequate heritable security, the trustee is liable for the sum advanced in excess of what would have been a proper investment, "with interest".

•    Conveyancing and Feudal Reform (Scotland) Act 1970 Sch 3, para 7 - Where a creditor performs a debtor's obligation, the creditor is entitled to recover expenses and charges, including interest reasonably incurred, at the rate in respect of advances secured under the standard security, or if none specified, at the bank rate in force at the relevant time.

•    Companies Act 1985 ss 99-105 - Various obligations to pay interest in relation to allotment of shares at "the appropriate rate" (5% or a rate otherwise prescribed by SI (s 107)). S 347F – Interest payable on any payment to the company by a director of a political donation, or expenditure incurred in breach of ss 347C-347D, at a rate to be prescribed by SI.

•    Bankruptcy (Scotland) Act 1985 s 51(1)(g) - Provides for interest to be payable on debts from the date of sequestration. S 51(7) – the rate is the higher of the "prescribed rate" at date of sequestration, or the rate applicable to the debt apart from sequestration. (The "prescribed rate" is the judicial rate defined in SI 1985/1925, and amended by SI 1993/439.) Sch 1, para 1 - Debts brought forward by sequestration are subject to the deduction of interest at the rate specified in s 51(7).

•    Insolvency Act 1986 s 189 – Interest is payable on any debt proved in winding up. S 212(3) - Misuse of company funds by officer, liquidator or administrative receiver renders interest to be paid at such rate as the court thinks just. S 304 - Where a trustee of a bankrupt's estate has misapplied or retained money or other property comprising the bankrupt's estate, they can be ordered to repay with interest. Sch B1, para 8, part 75 – The court may examine the conduct of a person purporting to be the administrator of a company and order that person to repay or restore money with interest for a breach of duty.

•    Insolvency (Scotland) Rules 1986 (SI 1986/1915) rule 1.19 - Interest is added to advances made by "the responsible insolvency practitioner" in respect of the company payable by the supervisor in a voluntary arrangement, at the official rate. Rule 4.66 - Interest is payable at "the official rate", which in s 189(4) of the Insolvency Act 1986 is deemed to be whichever is the greater of the rate specified in s 17 of the Judgments Act 1838 or the rate applicable to that debt apart from the winding up.

•    Debtors (Scotland) Act 1987 s 50(5) - Interest is chargeable on sums paid or repaid under earnings arrestments at "the specified rate", (ie the sheriff court decree rate specified in s 73(1)). S 55(7) – Interest is chargeable on sums paid or repaid under current maintenance arrestment at the same rate.

•    Adults with Incapacity (Scotland) Act 2000 s 81 - Where funds held under a fiduciary duty are misused, interest is payable at the Sheriff Court decree rate. Sch 2, para 8(7) - Where there is a deficiency in the accounts of a guardian, interest is payable at the Sheriff Court decree rate.

(ii) Interest on court decrees and tribunal awards

•    Sheriff Courts (Scotland) Extracts Act 1892 s 9, as amended by s 4 of the Administration of Justice (Scotland) Act 1972 and para 2 of the Act of Sederunt (Interest in Sheriff Court Decrees and Extracts) 1993 (SI 1993/769) - Sets the judicial interest rate at 8% per annum.

•    Court of Session Act 1988 s 42 - The House of Lords may, when hearing an appeal from the Inner House, make such order with regard to interest, simple or compound, as it thinks fit. S 34 - Interest is awarded where an appeal to the House of Lords is dismissed for want of prosecution.

•    Employment Tribunals (Interest) Order 1990 (SI 1990/479) Articles 3-4 – Applies the "42 day rule" and interest at rate specified in s 17 of the Judgments Act 1838.

•    Act of Sederunt (Rules of the Court of Session 1994) 1994 (SI 1994/1443) Rule 7.7 - Sets the judicial interest rate at 8%.

•    Employment Tribunals (Interest on Awards in Discrimination Cases) 1996 (SI 1996/2803) Article 8 - Interest applies from the day after the date of the decision at the rate specified in the Employment Tribunals (Interest) Order 1990.

(iii) Interest payable by State to individual

(a) Pension schemes

•    Teachers' Superannuation (Scotland) Regulations 1992 (SI 1992/280) regulation E31A, as amended by SI 2001/3649 - Interest on late payments after one month at "the base rate for the time being quoted by the reference banks" on a day to day basis compounded with quarterly rests. Regulation 13 - Interest payable on returned contributions at 3.5%, compounded with annual rests.

•    NHS Superannuation Scheme (Scotland) Regulations 1995 (SI 1995/365) regulation 3 - Cash equivalent for transfer-out arrangements and buy-outs. Interest is awarded on a daily basis from date of leaving pensionable employment at the same rate as that payable for the time being on judgment debts by virtue of the Judgments Act 1838 s 17. Regulation 9 - Interest on late payment of benefits at base rate for the time being quoted by the reference banks on a day to day basis compounded with quarterly rests.

•    Local Government (Discretionary Payments and Injury Benefits) (Scotland) Regulations 1998 (SI 1998/192) - Compensation for premature retirement. Regulation 30 - Interest at 1% above base rate on a day to day basis compounded with quarterly rests.

•    Local Government Pension Scheme (Scotland) Regulations 1998 (SI 1998/366), regulation 81 – Overdue payments of more than one month require interest to be paid at 1% above base rate on a day to day basis compounded with quarterly rests. Regulation 88 - Same for contributions deducted in error from pay. Regulation 91 - Same for late payment of certain benefits.

•    The Scotland Act 1998 (Transitory and Transitional Provisions) (Scottish Parliamentary Pension Scheme) 1999 (SI 1999/1082) A2 - References to interest are to compound interest at 4% per annum with annual rests.

•    Local Government Pension Scheme (Management and Investment of Funds) (Scotland) Regulations 1998 (SI 1998/2888) - Administering authority must pay interest on any fund money "used by them and not repaid" at a rate not lower than the lowest rate at which they could have obtained a commercial loan of that amount at 7 days' notice.

•    NHS (Superannuation Scheme, Injury Benefits and Compensation for Premature Retirement) (Scotland) Amendment Regulations 2001 (SSI 2001/437) regulation 17 – (Inserting the new regulation T9), interest on late payment of benefits set at base rate, quoted by the reference banks, compounded with quarterly rests.

(b) Compulsory purchase

•    Land Compensation (Scotland) Act 1963 s 40 - Rate for compensation where entry is taken before payment is to be prescribed by SI, instead of the 5% prescribed by Lands Clauses Consolidation Act 1845 s 84.

•    Land Compensation (Scotland) Act 1973 s 16 – Interest is due on awards of compensation for compulsory purchase. S 33(6) – Same for farm loss payments. S 34(5) – Same for disturbance payments. S 59 – Same for compensation for injurious affection where no land was taken. All rates are prescribed by the Land Compensation (Scotland) Act 1963 s 40.

•    Planning & Compensation Act 1991 s 78(4) - Compensation for notice to treat ceasing to have effect carries interest at rate specified in the Land Compensation Act 1963 s 40. S 80(1) - Compensation awarded under a long list of provisions listed in Schedule 18 carries interest at the rate prescribed under s 40.

•    Roads (Scotland) Act 1984 s 149 - Where the roads authority is entitled to recover expenses it shall also be entitled to recover interest at the rate prescribed under the Land Compensation Act 1963 s 40.

•    Housing (Scotland) Act 1987, Sch 7, para 13 - Any sum payable by virtue of this section shall carry interest at the rate prescribed under the Land Compensation Act 1963 s 40, from the time of entry by the local authority on the land, or from vesting of the land, whichever is earlier, until payment.

•    Acquisition of Land (Rate of Interest after Entry) (Scotland) Regulations 1995 (SI 1995/2791) regulation 2 - Rate of interest on compensation for compulsory acquisition of land on which entry is taken before payment is 0.5% per annum below the base rate quoted by the reference banks.

•    Town & Country Planning (Scotland) Act 1997 Sch 15, para 30 - The acquiring authority is liable to pay compensation and interest on compensation as they would have been liable had they taken possession of the land under the Acquisition of Land (Authorisation Procedure) (Scotland) Act 1947 Sch 2, paragraph 3.

•    Contaminated Land (Scotland) Regulations 2000 (SSI 2000/178) Sch 3 - Compensation payable to a person who has been granted rights of entry in terms of EPA 1990, s 78G which allows matters specified in a remediation notice to be carried out. Interest runs from the date of granting of the rights until payment at rate specified in Land Compensation Act 1963 s 40.

•    Pollution Prevention and Control (Scotland) Regulations 2000 (SSI 2000/323) Sch 6, para 7 - Compensation is payable where a person is required to grant another rights of entry in order to fulfil an "off-site condition". Interest runs from various specified dates (date of depreciation in value of land, loss etc) until payment at the rate specified in the Land Compensation Act 1963 s 40.

(c) Other

•    Repayment of Student Loans (Scotland) Regulations 2000 (SSI 2000/110) Regulation 9 - Over-repayment carries interest at the same rate as charged on loan accounts.

•    Local Government (Scotland) Act 1975 s 9A (inserted by Local Government Finance Act 1992 s 110): interest is to be paid on the repayment of rates paid in error or repaid because of reduction in valuation.

(iv) Interest payable by individual to the State (other than taxes and duties)

(a) Repayment of grants and subsidies

•    Civic Government (Scotland) Act 1982 ss 99-100 - Local authority can recover expenses from any person entitled to interest at such reasonable rate as they may require from date of demand for expenses until payment.

•    Housing (Scotland) Act 1987 s 243 - Improvement grant becomes due to be repaid if it is not used. This carries interest at such reasonable rate as the local authority may determine from date paid until date repaid. S 274 – Repayment of reinstatement grants, due if qualifying work is not completed within a set time period, carries interest at such a rate as the local authority may determine from date paid until date repaid. Sch 19, para 1 – On breach of conditions of an improvement grant, it is to be repaid with interest from date of final settlement of balance by local authority until payment.

•    Tax Credits Act 2002 s 37 – Where an individual has been overpaid, due to his fraud or negligence, interest is added to the repayments at 6.5% per annum.

(b) Pension schemes

•    Teachers' Superannuation (Scotland) Regulations 1992 (SI 1992/280) regulation C2A, as amended by SI 1999/446, regulation 5 - Back contributions are payable into scheme, with interest payable at 7% per annum compounded with annual rests. Regulation 8, as amended by SSI 2001/291 - Additional contributions to purchase current added years, with interest payable at 4% per annum compounded with annual rests. Regulation G7, as amended by SSI 2003/423 - An employer is to pay interest on employers' contributions (part-time elections) at 7% per annum compounded with annual rests. Regulation G8 - Employers' contributions, interest at 8% per annum compounded with monthly rests.

•    Social Security Act 1998 s 57 (7B) – Provides for interest to be paid to the Secretary of State on employee pension contributions which have not been paid by the due date.

(c) Loans and guarantees

Various statutory provisions enabling or obliging local authorities to make loans:

•    Crofters Holdings (Scotland) Act 1886 s 32 – Loans made from the Secretary of State for purchase and equipment of fishing boats shall carry interest as the Secretary of State may determine.

•    Local Government (Development and Finance) (Scotland) Act 1964 s 7 – Local authority advances for the erection of buildings shall carry interest at a rate not less than ¼ per cent greater than the rate fixed by the Treasury.

•    Fire Precautions Act 1971 s 36 – Power of local authorities to make loans to meet expenditure on certain alterations. Every loan shall bear interest at the rate determined in accordance with the National Loans Act 1968 s 5.

•    Housing (Scotland) Act 1987 s 217 – Duty of local authorities to offer loans to meet expenses of improvement of houses in housing action areas.

•    Public Finance and Accountability (Scotland) Act 2000 s 9 – Scottish Ministers may lend sums to the Keeper of the Registers of Scotland. The rate of interest on any loan shall not be less than the lowest rate determined by the Treasury under the National Loans Act 1968 s 5.

•    Education (Student Loans) (Scotland) Regulations 2000 (SSI 2000/200) regulation 15, as amended by SSI 2001/228 - Interest on student loans at APR equal to increases in the Retail Price Index from March to March.

•    Graduate Endowment (Scotland) Regulations 2001 (SSI 2001/280) - Loans to bear interest at the rate above.

(d) Interest on financial penalties

•    Gas Act 1986 s 30D - Interest on penalties applied at the rate in the Judgments Act 1838.

•    Electricity Act 1989 s 27D - Interest on penalties applied at the rate in the Judgments Act 1838.

•    National Lottery etc Act 1993 s 10A – On penalties for breach of conditions in licences, interest is applied at the rate in the Judgments Act 1838.

•    Railways Act 1993 s 55 – On sums payable under a contravention order interest is applied at the rate in the Judgments Act 1838.

•    Postal Services Act 2000 s 35 – On financial penalties interest is applied at the rate in the Judgments Act 1838.

•    Enterprise Act 2002 s 113 – In mergers interest is applied on penalties at the rate in the Judgments Act 1838.

(e) Other

•    Civil Legal Aid (Scotland) Regulations 2002 (SSI 2002/494) regulation 41 - Sums secured over land under regulation 40 carry interest at the rate specified in the Rules of the Court of Session, at Rule 7.7.

(v) Taxes and duties

•    Finance Act 1989 s 178(2), as amended - Lists all the enactments charging interest on unpaid taxes and duties, the rate for which is to be that specified in regulations made under that section.

•    Taxes Management Act 1970 s 59C - Surcharge on unpaid income tax and capital gains tax carries interest at the rate in the Finance Act 1989 s 178. S 87 – Same provisions apply as regards overdue income tax on company payments and overdue corporation tax. S 103A - Interest on penalties is due at the rate specified under the Finance Act 1989 s 178.

Fossil Fuel Levy (Scotland) Regulations 1996 (SI 1996/293) regulation 24 – Interest is charged on late payments of the levy at 4% pa above the Royal Bank of Scotland base rate.

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