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ACCA Strategic Professional · Advanced Taxation (UK) · Corporation tax: taxable total profits

Brightwater Ltd is not a large company and pays its corporation tax of £120,000 for the year to 31 March 2026 nine months after the end of the period, on the due date. A later enquiry shows the tax was correct. How much interest is due, and which rate would apply to any later repayment of overpaid tax?

No interest is due because the tax was paid on time and was correct. If tax were later overpaid, interest on the repayment would be at the assumed overpaid rate of 3.50%, not the 8.50% rate charged on underpaid tax.

  1. ANo interest is due; overpaid tax carries interest at 3.50%Correct
  2. BInterest of £7,650 is due; overpaid tax carries interest at 8.50%
  3. CNo interest is due; overpaid tax carries interest at 8.50%
  4. DInterest of £3,150 is due; overpaid tax carries interest at 3.50%

Explanation

Payment on the due date (nine months and one day after the period end) means there is no underpayment, so no interest arises. Overpaid tax earns interest at the assumed overpaid rate of 3.50%, not the 8.50% underpaid rate.

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