The rate of interest on judgements has now been reduced from 8% to just 2%

[Jim Stafford]

The Courts Act 1981 (Interest on Judgment Debts) Order 2016 (SI No 624 of 2016) came into operation on 1 January 2017. The effect of the Order is to reduce the rate of interest payable on judgment debts from 8% to 2%. The 8% rate had applied since January 1989.

In many cases the rate of interest on judgments was academic, as many debtors were only able to pay a fraction of the actual judgment in any event. However, for some debtors it will be very welcome news.

I have no doubt that some people will now decide to stop paying creditors who are charging very high rates of interest, and oblige their creditors to consider obtaining judgment where they will only get 2% interest. Some debtors might use the change to re-negotiate the interest rate on loans etc. Obviously, such debtors would have their credit rating damaged, but their credit rating might have already have been damaged.

I think the 2% rate is too low. The cost of funding for some creditors would be substantially higher, and thus they may stand to lose money on certain types of business.


Jim Stafford

 

[lukas888]

Hi Jim,

Are revenue judgements also reduced to 2%.

 

[Jim Stafford]

As the interest rate on all judgments is reduced to 2%, then any judgment that the Revenue obtains would also be just 2%, which is considerably less that what Revenue currently charge, as set out below.

 IT, CT and CGT - 0.0219% per day (i.e. 8% per annum)

 PAYE/PRSI, VAT and RCT - 0.0274% (i.e. 10% per annum)

Jim Stafford

 

[cremeegg]

As the interest rate on all judgments is reduced to 2%, then any judgment that the Revenue obtains would also be just 2%, which is considerably less that what Revenue currently charge, as set out below.

 IT, CT and CGT - 0.0219% per day (i.e. 8% per annum)

 PAYE/PRSI, VAT and RCT - 0.0274% (i.e. 10% per annum)

Jim Stafford

Is there any reason to expect that revenue interest might fall in line with the reduction in interest on judgement debts.

 

[Jim Stafford]

Is there any reason to expect that revenue interest might fall in line with the reduction in interest on judgement debts

Whilst the Revenue interest rate a few years ago was as high as 10.75%, I believe it is unlikely to reduce any further from the current rates.

The Revenue do not "provide credit", it is "taken" from them. Accordingly, unlike banks and trade creditors, they cannot carry out credit assessments in advance etc. The Revenue need to charge a relatively high level of interest to encourage tax payers to pay their taxes on time.

Jim Stafford