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20% interest + 1.25% handling fee to settle your tax bill!

20% interest + 1.25% handling fee to settle your tax bill!

HMRC may start forcing people to pay 20% interest to settle their tax liabilities rather than using the government backed tax deferral scheme.

The Revenue has already encouraged tax payers to look at other credit options before applying to defer tax and they are now demanding to see credit card bills which could charge anything up to 20% interest on unpaid debts. The current average interest rate is 18.8%

One of the tax partners at UHY Hacker Young confirmed that his clients have been requested to produce bills from their credit card companies in order to justify their application for time-to-pay. It now appears to be the norm for HMRC to advise clients to return to their bank or make a credit card payment before they will be allowed to take advantage of the time-to-pay tax deferral scheme, he added. To add insult to injury, the Revenue charges an extra 1.25% handling fee for processing credit card payments.

The Time To Pay scheme was introduced in November 2008 to help businesses that were struggling with cash flow problems. Since that time, 6.4 billion pounds worth of taxes have been deferred.

The Revenue claims that there has been a fall in demand for the scheme; however it has also increased the amount of applications that get rejected. In 2009, 2.6% were rejected; in the past three months, the number rose to 7.4%.

It seems that HMRC wants businesses to max out their debts before they can get any government assistance and yet this will compound the problem for businesses that are struggling already.

A Revenue spokesman said the department had not changed its policy and it has always needed to be satisfied that all revenue raising avenues have been explored before agreeing to make a Time to Pay arrangement.

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Image: help with a caption please? by Jon Ovington

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