HMRC increases late payment interest again
HMRC has increased the rate of late payment interest for the second time in two months. In light of the reprieve for late filing penalties, do people need to worry?
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Accounting for VAT if there is no cash payment
Your business has submitted repayment returns for the last two quarters and you are concerned that you might have underpaid output tax on some supplies where no money has changed hands. Are your concerns justified?
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Treatment of distributions under review
The government has launched a consultation on modernising the tax treatment of distributions and repayments of capital by companies. The proposals could affect the distinction between dividends taxed as income and capital payments subject to CGT. What changes are being considered?
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Tax relief on equipment you haven’t paid for (yet)
The timing of tax relief for purchases of equipment isn’t straightforward when payments are delayed or goods are purchased through hire purchase (HP) agreements. How can you use these rules to your advantage and get tax relief before you’ve paid the final invoice?
In line with the increase in the recent Bank of England base rate, late tax payments will be subject to interest at a rate of 3% (currently 2.75%) per annum from 21 February 2022. The increase applies from the earlier date of 14 February for payments that are made in quarterly instalments. This is the second time HMRC has increased late payment interest this year, meanwhile the repayment interest rate, i.e. on money owed by HMRC, has remained at 0.5% for over twelve years.
At the start of the year HMRC announced that late payment penalties would not be charged on outstanding 2020/21 tax liabilities, providing the tax is settled by 1 April 2022. However, there is a hidden, avoidable cost because late payment interest will accrue from 1 February 2022 until the payment is made. For example, delaying payment of a £10,000 tax liability until 31 March 2022 will cost an extra £45 in late payment interest. The only way to avoid the increase is to pay any outstanding liability by 21 February.
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