Inheritance tax interest charge part of ‘fairer’ system, says HMRC
HM Revenue and Customs (HMRC) has argued that the interest due on late inheritance tax payments is part of a new system that is fairer for customers.
As from next month, the interest that HMRC can levy on inheritance tax liabilities that are not met within the allowed time is 3 per cent.
The move is part of a streamlining and simplifying of the interest HMRC both charges on late tax and pays out on overpaid tax.
Since March, interest on late inheritance tax payments and on refunds has been 0 per cent, although in the past, when the official base rate was higher than its current 0.5 per cent, it has been as much as 5 per cent.
The new interest charge has been criticised by lobby group, the Taxpayers’ Alliance, as “unjustifiable” and a “retrograde step”.
However, HMRC has responded by pointing out that interest is not a penalty but compensation for tax paid late.
The tax authority went on to say: “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.”
Under the new system, people who overpay their taxes will be guaranteed a minimum of 0.5 per cent interest on the money. This will be the case even if the official base rate falls below 1.5 per cent.