Revenue to charge interest on fines

MORE than 670,000 self-employed taxpayers are to be charged interest on fines and surcharges as well as outstanding tax, after falling a month behind on January payments.

Interest of 9.5 per cent will be levied on the 5 per cent surcharge imposed on tax payments still outstanding by the end of February. A fine of pounds 100 for missing the deadline for submitting tax returns, 31 January, will also incur interest.

The Inland Revenue is understood to be invoking statutory powers to impose interest on penalties which it has long had on paper, but has never used for this purpose. While the Revenue has always said that the 9.5 per cent charge would be levied on outstanding tax not paid by 31 January, accountants said the decision to impose it on fines and surcharges was unexpected.

Accountants said the Revenue was charging "interest on interest" in its efforts to reign in self-employed taxpayers who have failed to comply with the new system of self-assessment.

They accuse the Revenue of using unnecessarily harsh measures.

Mavis Sargent, chairman of the tax committee of the Association of Chartered Certified Accountants, said: "This charge brings the Inland Revenue close to charging interest on interest. Clearly the Revenue is determined to bring defaulters into line. "Although this further penalty may seem Draconian, we would urge all taxpayers who have yet to settle their self- assessment bill to do so speedily. Otherwise they may risk ongoing penalties." The interest charge of 9.5 per cent will begin to take effect on 9 March, adding to the burden of fines and penalties already imposed on late payers by the Inland Revenue. In addition to a fine of pounds 100 for missing the January deadline, a further fine of pounds 100 can be levied if returns are still not submitted by the end of July.

The Revenue insists the system of self-assessment has performed well. But it admits that there have been glitches.