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ACCA Applied Skills · Taxation (UK) · Principal sources of revenue law and practice

Ravi's tax return was filed late, so HMRC treated a payment of tax as underpaid by £6,000 for exactly one year. Using the rate of interest on underpaid tax in the tax tables (8.50%), what is the interest due?

Interest is £6,000 multiplied by 8.50% for one year, giving £510. The rate on underpaid tax applies, not the 3.50% overpaid rate or the 3.75% official rate, which would give a lower figure.

  1. A£510Correct
  2. B£210
  3. C£225
  4. D£300

Explanation

Interest on underpaid tax is £6,000 x 8.50% x 1 year = £510. £210 would use the 3.50% overpaid rate. £225 would use the 3.75% official rate. £300 would use a 5% rate not given in the tables.

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