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 ...
Understanding the full scope of these late tax payment adjustments is essential for adept tax management!
Interest on late tax payments was calculated by taking the Bank of England (BOE) base rate and adding 2.5 percentage points. However, this has increased to base rate plus 4 percentage points, which is a considerable increase.
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,
"Businesses may escape some of these penalties by setting up timely payment arrangements!
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.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about late tax payments and how much it could cost your business, it may be a great idea to call me on 01908 774320 and let's see how I can help you.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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