In the context of recent UK economic performance and reduced tax revenues, it is unsurprising that the government has maintained its focus on utilising all avenues to tackle tax avoidance and increase its tax take.
In this vein, the Spring Statement comes with a new regime for interest payable on late payments made by taxpayers. Under the new rules, there will be an increase of late payment interest on most taxes by 1.5% from April. Currently, the interest payable on the late payment of most taxes is the Bank of England rate plus 2.5%, which will increase to the Bank of England rate plus 4%.
As can be expected, the lopsided position is not mirrored in the event of HMRC error. For example, when an HMRC error results in overpaid VAT, a taxpayer is expected to gratefully receive interest of the Bank of England rate minus 1%.
The government will also increase late payment penalties for VAT taxpayers and income tax Self Assessment taxpayers as they join Making Tax Digital (MTD), from April 2025 onwards. The new rates will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more.
In other efforts to reduce tax avoidance and maximise HMRC’s haul, the government will be investing £114 million over the next five years to recruit an additional 600 HMRC debt management staff, as well as £100m to go towards an additional 500 compliance staff.
HMRC will re-start “direct recovery” of tax debts owed by individuals and companies who have the ability to pay but choose not to do so. The government will also explore options to automate the process for collecting lower value tax debts.
The Treasury projects that these efforts will result in an additional revenue gain of £935m per year by 2029/2030.
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As always, if you have any queries on how this might affect you, please don’t hesitate to contact myself, or your usual Mercer & Hole contact.
