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ACCA Applied Skills · Taxation (UK) · Payment of inheritance tax

Tax of £12,000 on a lifetime chargeable transfer was paid exactly six months after its due date. Using the rates in the TX-UK tax tables, what is the interest charged on the late payment?

The interest is £510. Late inheritance tax carries interest at the 8.5% rate for underpaid tax, so £12,000 × 8.5% for six months of a year gives £510. Using the overpaid rate or a full year would give wrong figures.

  1. A£510Correct
  2. B£210
  3. C£225
  4. D£1,020

Explanation

Late inheritance tax is charged interest at the rate on underpaid tax, 8.50%. £12,000 × 8.5% × 6/12 = £510. The figure of £210 wrongly uses the 3.5% rate on overpaid tax. £1,020 forgets to time-apportion and charges a full year.

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