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Detail of outcome
A total of 21 written responses were received from several different areas, including representative bodies and accountants. The consultation team also met with several organisations.
The interest harmonisation proposals received broad support across all taxes, and the government intends to proceed broadly as proposed in the consultation.
Some specific concerns were raised with regards to VAT repayment interest not being paid where there are missing returns or for periods of reasonable enquiry.
The government has considered these concerns and decided that where a repayment return is received and there are other outstanding returns HMRC will pay interest from the date any outstanding returns are submitted, subject to reasonable enquiry.
The majority of respondents were broadly in favour of the late payment penalty proposals. Some expressed some concern about complexity, and regarding specific issues such as the initial penalty being applied 15 days after the payment due date.
There were also queries about the interaction with Time to Pay arrangements (TTP) and the length of time taken to finalise these agreements with HMRC.
The government has considered both areas of concern in detail. It has decided that to be fair to the vast majority who pay on time, penalties should be calculated on debts remaining due after 15 days from the payment due date although on a mitigated basis where payment is made or a TTP arranged up until 30 days after the due date.
Where a successful TTP agreement is made, the government will take the date of contact with HMRC as the effective date for the purpose of late payment penalties.
This consultation presents options for aligning rules and rates for interest across the main taxes, Income Tax Self-Assessment (ITSA), Corporation Tax (CT), and VAT. This includes aligning the high level rules for interest on VAT debt bringing them into line with ITSA and CT. The consultation also explores how late payment penalties could work and interact with interest.
The government is proposing a new hybrid model that accounts for comments from previous consultations for late payment penalties and combines a ‘penalty charge element’ together with an ‘interest’ type calculation.
The government has also published the summary of responses to the recent consultation on late submission sanctions and it is intended to take forward both elements as a coherent package. These consultations form part of the government’s work to align and simplify the tax administration framework.