Late Payments To Be Charged

HM Revenue and Customs has confirmed that bereaved families will have to pay 3% interest on late payments of inheritance tax from September.

Payments are meant to be made within six months of a death, but in March, interest on late payments, which roughly follows Bank of England base rates, fell to zero.

The Treasury, on the other hand, has set the interest rate it pays when tax is overpaid to just 0.5% in comparison.

The Taxpayers Alliance said that such a move was “desperate” and “unfair”.

Inheritance tax is imposed on estates including properties, possessions, money and investments that have a total worth of over £325,000. Any estate valued to be worth more than this amount is taxed at 40%.

Making Things Fairer?

HM Revenue and Customs released a statement which says: “Interest is not a penalty but compensation for tax paid late.

“We are streamlining the rates charged and paid for interest to simplify and make things fairer for customers.

“This has been subject to extensive consultation over the last 18 months and has been largely welcomed by customer groups and their representatives.

“The alignment of rates that will take place in September will mean that all tax paid late is subject to interest at the same rate, so ensuring all taxpayers are treated equally.

“And, in the interest of fairness we will also be introducing a repayment interest floor, to ensure that any taxpayer overpaying tax will receive interest.”

Double Standards?

The interest that HM Revenue and Customs pay will always be one percent below the Bank interest rate, but will never stand at anything lower than 0.5%.

Since March, both the late inheritance tax payments interest, and interest paid by Revenue and Customs stood at zero, below the Bank of England interest rate of 0.5%.

Political director of the Taxpayers’ Alliance, Susie Squire believes the public will be extremely angry with the changes. She also describes the alterations as “unjustifiable.”

“It’s a desperate move and a seriously retrograde step for the government. It’s basically one rule for them and another for everyone else,” she explains.

She also says she believes the decision to be more about “political point-scoring rather than raising any significant revenue,” and that it was “feeding the government’s addiction to debt, tax and spend.”

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