HMRC SDLT: Interest on Unpaid Tax: Relevant Dates and Exceptions Explained
Compliance: Interest – HMRC Internal Manual
This section of the HMRC internal manual focuses on compliance related to interest. It outlines the principles and concepts that guide HMRC’s approach to interest compliance. Key points include:
- Understanding the calculation of interest on unpaid taxes.
- Guidelines for applying interest in various compliance scenarios.
- Procedures for reviewing and adjusting interest charges.
- Ensuring transparency and fairness in interest-related compliance actions.
Read the original guidance here:
HMRC SDLT: Interest on Unpaid Tax: Relevant Dates and Exceptions Explained
Interest on Unpaid Tax: Important Dates and Rules
When you have unpaid tax, you will be charged interest. This starts 30 days after a certain date known as the ‘relevant date.’ The rules about this can change depending on different situations.
When is Interest Charged?
According to Finance Act 2003 (FA03/S87), here’s how it works:
- General Rule: Interest on unpaid tax starts 30 days after the relevant date.
- Special Rule from 1 March 2019: If you need to submit a return and pay tax within 14 days, interest begins from 14 days after the relevant date.
What is the Relevant Date?
Typically, the relevant date is the effective date of the transaction. However, there are special cases where this changes:
1. Group Relief Withdrawals
If relief is taken away under FA03/SCH7/PARA1, the relevant date changes. Instead of the transaction date, the relevant date becomes the date when a disqualifying event occurs under FA03/SCH7/PARA3. For more details, refer to SDLTM23070.
2. Reconstruction and Acquisition Relief Withdrawals
If relief is withdrawn under FA03/SCH7/PARA7, the relevant date is the date when a disqualifying event happens under FA03/SCH7/PARA9. More information can be found at SDLTM23230.
3. Charities Relief Withdrawals
When relief under FA03/SCH8 is removed, the relevant date is the date of the disqualifying event according to FA03/SCH8/PARA2. For further details, see SDLTM26020.
4. Deferred Payments
If you have arranged for a deferred payment under FA03/S90, the relevant date is the date that the deferred payment is due. Additional information is available in SDLTM50900.
Examples of Relevant Dates
Understanding the relevant date in different scenarios is essential for determining when interest begins to accumulate. Here are some examples to illustrate this:
Example 1: Standard Transaction
If you completed a property purchase on 1 April and the tax return is due on 1 May, the interest on any unpaid tax would start accruing on 1 June, which is 30 days after the effective date of the transaction.
Example 2: Withdrawn Group Relief
Suppose that relief under group relief rules is taken away on 10 April because of a disqualifying event. In this scenario, the relevant date will be 10 April, and if the tax was not paid within 30 days, interest will start from 10 May.
Example 3: Deferred Payment Agreement
If a deferred payment has been agreed upon, and the payment is due on 15 June, then the relevant date for charging interest will be 15 June. This means that interest will begin to accrue from 15 July if the tax remains unpaid.
How Interest is Calculated
Once the relevant date is established, the interest on unpaid tax will accumulate based on the following:
- Rate of Interest: The interest rate applied is determined by HMRC and can change periodically. Ensure you check for the current rates.
- Days of Accrual: Interest will be calculated from the relevant date until the point of payment.
Responsibility for Payment
It is your responsibility to ensure that you pay the tax due and any applicable interest. Ignoring this can lead to additional penalties and fees that could increase your overall tax liability.
Communication with HMRC
If you think you may have trouble paying your tax on time, it’s crucial to get in touch with HMRC before the relevant date passes. They can provide guidance on your options, which might include setting up a payment plan to manage your tax liabilities better.
Records to Keep
In case of any disputes regarding interest or tax payments, keep adequate records of:
- Transactions: Document dates and details of any related transactions.
- Communications: Keep records of any correspondence with HMRC about your tax liabilities.
- Payment Receipts: Retain proofs of payment for any tax and interest paid.
Adjustments and Appeals
If you believe the interest charge is incorrect, you can appeal to HMRC. When doing so, ensure you include:
- Evidence: Any supporting documentation that backs up your claim.
- Clear Explanation: Outline clearly why you disagree with the interest charged.
Special Circumstances
In certain cases, special rules might apply. For example:
- Bankruptcy: If you are bankrupt or in an Individual Voluntary Arrangement (IVA), different rules may apply to interest on unpaid tax.
- Outside of UK: If you are a non-resident and own UK property, you may have specific obligations around tax and interest that you should understand.
Stay Informed
The rules regarding tax and interest can change. It’s vital to stay informed about new legislation or changes in HMRC guidance. Regularly check the official HMRC website and consider consulting a tax advisor for more specific advice related to your circumstances.
Sources of Further Information
For additional details on interest on unpaid tax, and the specific requirements and calculations, you can refer to:
- SDLTM23070 – Group Relief Withdrawals
- SDLTM23230 – Reconstruction and Acquisition Reliefs
- SDLTM26020 – Charities Relief Withdrawals
- SDLTM50900 – Deferred Payments
Understanding the rules around interest on unpaid tax can help you manage your responsibilities and avoid unnecessary charges. It is essential to be proactive and seek assistance if needed to ensure compliance with tax regulations.
Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: Interest on Unpaid Tax: Relevant Dates and Exceptions Explained
