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ACCA Strategic Professional · Advanced Taxation (UK) · Stamp taxes (stamp duty, stamp duty reserve tax and stamp duty land tax)

Dhillon Ltd paid SDLT of £4,000 exactly six months after the due date. Using the rate of interest on underpaid tax of 8.50% per year, and pro-rating by months, what is the interest charge?

The interest is £170. Late-paid SDLT carries interest at the underpaid tax rate of 8.5%. On £4,000 for six months this is £4,000 × 8.5% × 6/12. Using the overpaid rate or the official rate, or charging a full year, gives wrong figures.

  1. A£170Correct
  2. B£70
  3. C£150
  4. D£340

Explanation

Interest is charged on late-paid tax at the underpaid rate of 8.5%. £4,000 × 8.5% × 6/12 equals £170. £70 wrongly uses the overpaid rate of 3.5%, £150 uses the official rate of 3.75%, and £340 ignores that only six months elapsed.

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