Businesses are encouraged to understand the significant changes in HMRC's approach to late tax payments. The interest rate charged by HMRC for late tax payments, specifically for most taxes and duties have risen from 7% to 8.5% this month ...
Businesses dealing with Corporation Tax quarterly instalment payments (QIPs) and Customs Duty will also notice shifts in incoming costs. Specifically, interest on late QIPs has increased to base rate plus 2.5 percentage points. Late Customs Duty payments have risen to base rate plus 3.5 percentage points.
This nuanced approach by HMRC can lead to variations in impacts depending on the nature of the tax, making it vital for businesses to remain informed!
It's important to note that despite the increase in interest rates for late tax payments, it won't come as a surprise that no changes have been made to the repayment interest rates for overpaid tax and duties which is set at 3.5% for most taxes and duties.
HMRC's rationale behind these adjustments is part of a broader strategy to drive down the debt balance associated with late tax payments. The increased penalties may seem harsh, especially with the introduction of daily penalties calculated at 10% per annum on underpaid VAT from this month,
For those operating under Making Tax Digital (MTD) for income tax, the implications will extend further depending on the year they sign up, adding another layer of complexity to their tax obligations.
Understanding the full scope of these late tax payment adjustments is essential for adept tax management.
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