Income Tax

aden_2

Hi,

Does anyone please have any advice regarding problems with The Inland Revenue?

Brief history-
3 years ago, my 01/02 accounts were looked into and they found me owing unpaid tax to an amount that I was unable to pay in full. I have been paying £50/month but interest charges are adding up as the total amount is not being paid up quick enough. The interest is now at 70pence/day. Can they justify this? Can the interest be freezed? Could this be seen as a similar situation to the banks regarding unfair charges and interest? Thank you for taking the time to read this. Any help would be appreciated.

Aden

gingercordial

I know a little bit about this as I am a tax adviser BUT I specialise in companies not people so can only give you general pointers.

aden wrote:

Can they justify this?

Yes, the interest is justified, assuming it is being calculated in accordance with the rates given here: http://www.hmrc.gov.uk/rates/interest-late.htm (the first section is income tax). The current rate is 7.5% per annum. Depending on the amount then 70p per day could well be right, especially as you say it's dating back to 2001/02. They can also add a surcharge to your tax bill if paid late: http://www.hmrc.gov.uk/sa/surcharges.htm.

aden wrote:

Can the interest be freezed?

Yes, if your Inspector agrees to do this. You can ask! They are allowed to negotiate on all sorts of things.

aden wrote:

Could this be seen as a similar situation to the banks regarding unfair charges and interest?

I don't think so, since their ability to charge interest is set out in the tax laws rather than being part of any sort of unfair contract between you and HMRC. Also they are meant to be offputting as the whole point is to get people to pay their tax asap. 7.5% is really not a bad rate of interest to be charged as it's not that much above the base rate - I don't think you couldn't get many loans for less than that so it would be difficult to argue that it's really unfair. Also they do PAY you interest if you have overpaid tax, which makes the system more fair.

Sorry if that's not what you wanted to hear. It is worth asking them to freeze it (and remove surcharges if they've applied these) - they just might, especially if this was an honest mistake on your part.

There's a Cutting Taxes board on these forums for any more technical questions!