Reinstate rule to waive interest when no tax is due

13 January 2025

Issue: 4968 / Categories: News

The government needs to address unfair tax rules as interest rates on late payments rise says the Chartered Institute of Taxation (CIOT). The rate on late payment of tax is due to increase by a further 1.5% in April with no equivalent increase on overpaid tax.

The CIOT is therefore urging the government to re-introduce rules which enable HMRC to waive interest on underpaid VAT when no actual tax loss to the exchequer occurs. This power was omitted from the new VAT interest regime which came into effect for VAT return periods starting on or after 1 January 2023.

Richard Wild CIOT’s head of tax technical said: ‘It is possible for a taxpayer to under declare an amount of VAT due to HMRC in circumstances where that VAT is reclaimable by a third party such as the taxpayer’s customer. Under...

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