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ACCA Strategic Professional · Advanced Taxation (UK) · Corporation tax: the scope of corporation tax, including close companies and investment companies

Delta Ltd overpaid corporation tax of £60,000 and HMRC repays it exactly 6 months after the date the tax was due and payable. Using the ATX-UK tax tables, what is the interest that HMRC pays to Delta Ltd, assuming a flat annual rate for the period?

HMRC pays interest of £1,050. Overpaid tax earns interest at 3.50%, which gives £2,100 for a year on £60,000. Six months is half a year, so the interest is £1,050. Using the higher underpaid rate or the official rate would be wrong for a repayment.

  1. A£1,050Correct
  2. B£2,550
  3. C£1,125
  4. D£2,100

Explanation

The rate on overpaid tax is 3.50%. £60,000 x 3.50% = £2,100 for a year, and 6/12 of this is £1,050. £2,550 uses the 8.50% underpaid rate (60,000 x 8.5% x 6/12). £1,125 uses the 3.75% official rate (60,000 x 3.75% x 6/12). £2,100 ignores the 6-month period.

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