Statutory interest paid by company administrators was ‘yearly interest’ for UK tax purposes and must, therefore, be paid after deduction of income tax at the basic rate. 
 
The administration of Lehman Brothers International (Europe) began on 15 September 2008 and resulted in a surplus (estimated at around £7 billion) being available for creditors after payment of proved debts. The existence of the surplus in the administration entitled creditors to receive statutory interest on their debts. 
 
An issue arose as to whether the statutory interest payable on the proved debts was ‘yearly interest’ within ITA 2007, s 874(1). If it was, the administrators would be required (subject to certain exceptions) to deduct basic rate income tax from the payments and account for it to HM Revenue and Customs (HMRC). The High Court held on the administrators' application for directions that