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ACCA Strategic Professional · Advanced Taxation (UK) · Corporation tax: the comprehensive calculation of the corporation tax liability, including overseas aspects

Omega Ltd overpaid corporation tax of £60,000 for an accounting period, having paid it by the normal due date. HMRC repaid the excess six months after the due date. Using the assumed rates in the ATX-UK tax tables, what is the interest Omega Ltd will receive on the overpayment for this period?

Omega Ltd receives £1,050. Overpaid corporation tax earns interest at the assumed rate of 3.50%, not the underpaid rate. Six months on £60,000 gives £60,000 x 3.50% x 6/12, which is £1,050.

  1. A£2,550
  2. B£1,050Correct
  3. C£1,125
  4. D£5,100

Explanation

Interest on overpaid tax is at 3.50%, running from the later of the due date and the actual payment date until repayment. £60,000 x 3.50% x 6/12 = £1,050. £2,550 uses the underpaid rate of 8.50% for six months. £1,125 uses the 3.75% official rate. £5,100 uses 8.50% for a full year.

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