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HMRC will no longer be including interest on taxes returned to taxpayers, the department has announced, drawing angry reactions from some organisations.
From 27 January, 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) will be reduced from 0.75% to 0%.
The change could have adverse affects on small firms, said Stephen Alambritis, chief spokesperson for the Federation of Small Businesses, which has been campaigning for equality in the interest the Revenue charges and pays.
‘It’s no fault of taxpayers if they overpay,’ said Mr Alambritis, ‘and HMRC shouldn’t be taking advantage of low national interest rates’.
He added: ‘A small business that overpays its taxes could find itself in serious difficulty – especially if the money is not returned promptly and with interest’.
Robin Williamson, the technical director of the Low Incomes Tax Reform Group, remarked that 0% interest ‘clearly shows’ that the Revenue needs to reconsider the formula it uses to calculate its interest rates.
Mr Williamson went on to say that overpaid taxes should be restored with interest to members of the public – especially low-income savers and the elderly – as compensation for being without the use of the funds.
The taxman’s new zero rate of interest will also apply to overpaid corporation tax for accounting periods ending on or after 1 October 1993 (under CT (pay and file)) and for accounting periods ending after 1 July 1999, in respect of periods after the normal due date.
The Revenue – which has confirmed that its interest rates cannot fall into negative figures – has made wide-scale changes to all its surcharges.
Taxpayers will now be expected to pay 3.5% on IT, NICs, CGT, SDLT and other taxes, in cases of fraud, neglect and on penalties charged: a reduction of 1% on the current interest rate.
Details of all the new rates can be found on a dedicated page of the HMRC website.
