Taxpayers missing the 31 January self-assessment deadline could face effective annualised interest rates of up to 70%, a tax expert has claimed.
Maurice Fitzpatrick, a tax partner at Chantrey Vellacott, reached the figure by totting up the penalties, surcharges and interest payable over a year. He calculated the average rate of ‘interest’ – using the same method – would be about 25%.
The Inland Revenue, which still has more than three million tax returns outstanding, said it did not recognise Fitzpatrick’s workings.
Experts have forecast that up to two million taxpayers could miss the deadline, creating a possible #200m penalty windfall for the Treasury.
Fitzpatrick, who also noted the fixed penalty will be reduced for taxpayers owing less than #100, said: ‘Paying late represents an extremely expensive form of borrowing.
‘The thrust of self-assessment is to force taxpayers to submit their returns and pay tax on time. The system is intended to be vicious.’
From 1 February, interest accrues on a daily basis at 9.5%. Any tax outstanding at the end of the month incurs a flat-rate surcharge of 5% in addition. If tax is still owed to the Revenue on 31 July, a 10% surcharge replaces the previous one.
A Revenue spokesman said: ‘We do not recognise the type of charges that are being put forward. The system works on a series of penalties, surcharges and interest rates, not an annual percentage rate.’
The warning comes as the English ICA and accountants continued to push for a two-month deadline extension.
Rodney Taylor, a tax partner at Lubbock Fine, said more publicity was needed for payment deadlines, as the tax returns failed to set out arrangements for paying tax. He said many taxpayers filing this month will not receive statements of account detailing what tax should be paid.
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