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ACCA Applied Skills · Taxation (UK) · The procedures relating to compliance checks, appeals and disputes

Rosa postponed £5,000 of tax originally due on 31 January 2025. The tribunal decided she must pay £3,000 of it, and she paid this 4 months after the original due date. Using the interest rate on underpaid tax of 8.5%, what interest is payable on the tax she must pay?

Interest is charged only on the £3,000 the tribunal found due, from the original due date until payment, at 8.5%. £3,000 × 8.5% × 4/12 equals £85. Charging interest on the full £5,000 or for the wrong period gives incorrect figures.

  1. A£85Correct
  2. B£255
  3. C£425
  4. D£170

Explanation

Only the £3,000 found due bears interest: £3,000 × 8.5% × 4/12 = £85. £425 would apply to the full £5,000 (£5,000 × 8.5% × 4/12 = £141.67 is actually different, so £425 is a 12-month error on £5,000). £255 is £3,000 for a full year. £170 uses 8 months.

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