An interest in overpaid council tax

This article was published on: This is Money.

WE HAVE recently received a £2,600 refund from our local council for overpayment of council tax over 13 years. The reason given was 'to correct an inaccuracy in the valuation list, caused, for example, by a clerical or valuation error'.

However, we felt we were entitled to interest on our money which we estimated to be around £500. But the council has refused. C&MT, Oakham, Rutland Margaret Stone of the Daily Mail says: THIS is one for John Prescott and your local MP. Council tax ultimately comes under the aegis of the Office of the Deputy Prime Minister.

This is the answer I received when I took your query there: 'The issue of interest on overpaid council tax has been considered in the past and it was concluded that a system to include interest payments could be of disproportionate cost to local authorities and, therefore, to local taxpayers.

'The small amounts of interest that might accrue in most cases would more than outweigh the costs involved in operating such a system. We have no plans to change this.'

It is specious argument. Interest is paid on overpayments of business rates 'because bigger sums are usually involved'. And if the taxman has taken too much income tax, HM Revenue and Customs pays interest when it makes a refund.

While it is true that householders don't pay interest on overdue council tax, local authorities jump on non-payment quickly, not 13 years later.

The arithmetic regarding the interest is complicated, involving compound interest on cumulative monthly council tax overpayments, plus the many different rates of interest over the period.

But the answer is, as you say, going to be around £500.