Harmonising Interest Charges on Late Payment of Taxes – HMRC consults further on specific proposalsMonday, December 8th, 2008
In June 2008, HMRC published a consultation document which contained proposals to harmonise the interest paid on overpayments and charged on late payments across all taxes. Responses were generally supportive and HMRC will be publishing draft legislation to charge simple interest on late payments and pay simple interest on overpayments across all taxes.
Of the options considered in the earlier consultation, HMRC is proposing
- to use the Bank of England Base Rate instead of the current “Reference Rate”,
- to track changes in the Bank of England Base Rate, even if that means changing the interest rates monthly
- to continue with one interest rate for late payments and a lower rate for overpayments
- to charge simple interest rather than compound interest.
With regard to late payments by employers of PAYE tax, NICs etc, where interest is only charged on amounts outstanding at the year end, responses to the earlier consultation were strongly in favour of charging interest on late payments of PAYE in-year. The proposal for consultation now is to make use of the P35 as a means of identifying late payments by reporting the total amounts that were due for each month of the tax year, for comparison with the amounts actually paid. (See the item Meeting the Obligations to File Returns and Pay Tax on Time for further information about this proposal.)
Responses are requested by 13 February 2009. The legislative changes to achieve harmonisation across all taxes will be included in the 2009 Finance Bill, although implementation dates are uncertain at present.
Interest – Working Towards a Harmonised Regime
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