ACCA Strategic Professional · Advanced Taxation (UK) · Value added tax
Calder Ltd underpaid VAT of £20,000 and HMRC charges interest on it. Using the ATX-UK rates of interest, which statement about the interest rate is correct?
Interest on the underpaid VAT runs at 8.50%, the rate of interest on underpaid tax in the ATX-UK tables. The 3.50% overpaid rate and the 3.75% official rate do not apply to tax that has been underpaid.
- AInterest runs at 3.50%, the rate on overpaid tax
- BInterest runs at 8.50%, the rate on underpaid taxCorrect
- CInterest runs at 3.75%, the official rate of interest
- DNo interest arises because VAT uses penalties instead
Explanation
The tables give 8.50% as the rate of interest on underpaid tax. The 3.50% rate applies to overpaid tax, and the 3.75% official rate relates to benefits, not underpaid tax.
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