Taxing changes - and too many taxes

The Inland Revenue has changed the rates of interest on tax and national insurance contributions paid late and overpaid.

The changes come at a time when, co-incidentally, the Chartered Institute of Taxation, the leading professional body for taxation in the UK, was calling on the Government to do something about the current plethora of taxation rates.

The CIOT told the Treasury: "We are still of the opinion that something needs to be done about the plethora of 'taxation' rates impinging on taxpayers. We have mentioned these in previous Budget representations, but the position seems to have got worse rather than better.

"We now have:

• Upper rate for National Insurance (NI) 1 per cent;
  
• Taper rate for family element of Child Tax Credit 6.67 per cent;
  
• Class 4 rate of NI 8 per cent;
  
• Contracted out employee rate of Class 1 NI 9.4 per cent;
  
• Starting rate of income tax 10 per cent;
  
• Not contracted out employee rate of Class 1 NI 11 per cent;
  
• Savings rate of income tax 20 per cent;
  
• Basic rate of income tax 22 per cent;
  
• Higher rate on dividends 32.5 per cent;
  
• Taper rate for all other tax credits 37 per cent;
  
• Higher rate of income tax 40 per cent;
  
• Capital gains tax rates from 0 per cent to 64 per cent;
  
• Rates applicable to trusts 25 per cent and 34 per cent.

"With this number of different rates (in many cases acting on different measures of income!) how is the honest taxpayer to know if he is paying the right proportion of his income to the Exchequer?"

Changes

The changes announced by the Inland Revenue are as a result of recent changes in market rates and will take effect from August 6 regardless of whether or not interest has already started to run before that date.

The changes are:

• The rate of interest charged on income tax, national insurance contributions, capital gains tax, stamp duty and stamp duty reserve tax paid late and on tax charged by an assessment for the purpose of making good to the Crown a loss of tax wholly or partly attributable to failure or error by the taxpayer has changed from 6.5 per cent to 5.5 per cent.
  
• The rate of interest on overpaid income tax, national insurance contributions, capital gains tax, stamp duty and stamp duty reserve tax (repayment supplement) has changed from 2.5 per cent to 1.75 per cent.
  
• The rate of interest for Development Land Tax, Petroleum Revenue Tax (including Supplementary Petroleum Duty and Advanced Petroleum Revenue Tax), and on Advance Corporation Tax and Income Tax on Company Payments which became due on or before 13 October 1999 paid late or overpaid has changed from 5 per cent to 4.25 per cent.
  
• The rate of interest on late payment of Income Tax on Company Payments which became due on or after 14 October 1999 has changed from 6.5 per cent to 5.5 per cent.
  
• The rate of interest for late payments or repayments of Inheritance Tax, Capital Transfer Tax and Estate Duty has changed from 3 per cent to 2 per cent.
  
• The rate of interest charged on unpaid Corporation Tax for accounting periods ending on or after 1 October 1993 (under CT (Pay and File)) has changed from 5 per cent to 4.25 per cent.
  
• The rate of interest paid on overpaid Corporation Tax for accounting periods ending on or after 1 October 1993 (under CT (Pay and File)) has changed from 2 per cent to 1.25 per cent.
  
• The rate of interest for either late payments or repayment of Corporation Tax for accounting periods ended on or before 30 September 1993 (pre CT (Pay and File)), has changed from 5 per cent to 4.25 per cent.
  
• The rate of interest on unpaid Corporation Tax for accounting periods ending on or after 1 July 1999 (other than underpaid CT instalments) has changed from 6.5 per cent to 5.5 per cent.
  
• The rate of interest on overpaid Corporation Tax for accounting periods ending after 1 July 1999, in respect of periods after the normal due date, has changed from 3 per cent to 2 per cent.