Taking Account

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  • Taking Account

Paying your tax

Tax Alert August 2009

It’s that time of the year again! On the 31 July 2009 those of us with self assessment tax to pay will have made, or be considering, the payment of the second payment on account for 2009-10.

Failure to pay on time can have dire consequences.

Surcharges - Any tax owed for 2007-08, not covered by payments on account for that year, would have been due to be settled on the 31 January 2009. Any such amounts still unpaid on the 28 February 2009 would have a surcharge added of 5% of any prior year liability.

If this liability is still unpaid, or partly unpaid, on the 31 July 2009 a further 5% will be added.

Interest - Interest will always be charged on tax paid late. The rate of interest presently charged will depend on the type of tax in arrears; self assessment, corporation tax PAYE/NIC, VAT.

The current rates are:

  • On late paid income tax, NIC and capital gains tax – 2.5%
  • On late paid corporation tax not due by instalments – 1.5%
  • On late paid corporation tax due by instalments – 1.5%
  • On overpayments of income tax etc – 0%
  • On overpayments of corporation tax – 0.25%

Set-off - set-off means that if HMRC owes a taxpayer a refund of one tax, they can apply that refund to payment of other taxes due by the same individual. This could be particularly difficult in the current economic environment as if you have made a loss carry back claim and are expecting a refund of tax previously paid, you may find that the repayment is instead set against, for example VAT due.

Business payment support service - launched in November 2008 this scheme allows businesses to contact HMRC in advance of the payments falling due and request an arrangement allowing an extended payment period. It is open to large and small businesses.

Once a time to pay arrangement has been reached, the business will not incur any late payment penalties provided the arrangement is adhered to.

Hilton Sharp & Clarke