Inland revenue hits late payers

13 August 2004

The Inland Revenue has announced it is to raise the interest rate it charges on unpaid tax by one per cent.

The changes, which come into effect in September, will see taxpayers who are late with their taxes being charged interest at 7.5 per cent a year, up from 6.5 per cent.

The failure to settle capital gains, stamp duty, income tax and national insurance bills will all result in these higher rates being introduced for the taxpayer in question.

The rate it pays out on overpaid tax or because it has made an error will also rise, from 2.5 per cent to 3.5 per cent.

Inland Revenue said that its interest charge on overpaid tax reflected commercial rates on deposit accounts.

“No commercial body has the same rates for both paying and charging interest,” it said in a statement.

“If the interest rate on overdue tax was too low, it might encourage people to treat the Inland Revenue as a source of cheap credit.”

However, the gap between the two interest rates has long been criticised by accountants, who say it is unfair.

“It’s money for nothing as far as the Revenue concerned,” said the head of taxation at the Association of Chartered Certified Accountants, Chas Roy-Chowdhury.

“People should not defer or delay paying their tax, but sometimes there are genuine reasons why that can happen and they shouldn’t be charged such a high rate.”