Rates cut on late tax payments

Rates of interest on late payments and repayments of direct and indirect taxes have been cut by HMRC.

A reduction to 6.5% (from 7.5%) will take affect on 6 November. It applies to interest charged to overdue payments of income tax, National Insurance contributions, capital gains tax, stamp duty, stamp duty land tax and stamp duty reserve tax.

It is applicable, too, to tax credits overpayments in cases of fraud, neglect and on penalties charged, and on tax charged by an assessment for the purpose of making good to the Crown a loss of tax wholly or partly attributable to failure or error by the taxpayer.

The same 1% drop will affect the rate of interest on late payment of income tax on company payments that became due on or after 14 October 1999.

Also next month, there will be a reduction to 2.25% (from 3%) in the rate of interest on overpaid income tax, national insurance contributions, capital gains tax, stamp duty, stamp duty land tax and stamp duty reserve tax (repayment supplement).

Meanwhile, late payments or repayments of inheritance tax, capital transfer tax and estate duty will incur a new interest rate of 3% (from 4%).

With regards to late payments or repayment of corporation tax, the new interest rates vary depending on the end of the accounting period:

• On or before 30 September 1993: 5% (from 5.75%).
• On or after 1 October 1993: 5% (from 6%).
• On or after 1 October 1993: 2% (from 2.75%).
• On or after 1 July 1999: 6.5% (from 7.5%).
• After 1 July 1999, in respect of periods after the normal due date: 3% (from 4%).

The rate of interest for development land tax, petroleum revenue tax (including supplementary petroleum duty and advance petroleum revenue tax), and on advance corporation tax and income tax on company payments that became due on or before 13 October 1999 changes 5% (from 5.75%).

There will also be a cut to 6.5% (from 7.5%) in the rate of default interest charged on:

• Under-declared VAT.
• Air passenger duty.
• Insurance premium tax.
• Landfill tax.
• Climate change levy.
• Aggregates levy.
• Excessive repayments of VAT.
• Insurance premium tax.
• Landfill tax.
• Climate change levy, aggregates levy and customs duties recovered by assessment.
• Late payment of customs duty.

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