HMRC Interest Rates from 6 January 2009

HMRC have announced yet another series of changes to the rates of interest on direct and indirect taxes and national insurance contributions paid late and overpaid. The new rates will take effect from 6 January 2009.

Legislation has also been passed to allow HMRC to respond more quickly to changes in interest rates. From 7 January 2009, HRMC will change most interest rates 13 working days after the meeting of the Monetary Policy Committee of the Bank of England. Previously it took HMRC approximately one month to adjust rates.

Income Tax / Capital Gains Tax / Stamp Duties / National Insurance Contributions

· The rate of interest due on tax paid late, penalties and tax charged by assessment changes from 5.5% to 4.5%

· The rate of interest in overpaid taxes reduces from 1.5% to 0.75%

Petroleum Revenue Tax / Advance Corporation tax / Development Land tax

· The rate of interest changes from 4.25% to 3.5%

Income Tax on company payments due on or after 14 October 1999

· The rate of interest changes from 5.5% to 4.5%

Inheritance Tax

· The rate of interest changes from 3% to 2%

Corporation Tax

· On late payments in relation to accounting periods ending on or before 30 September 1993 before CT Pay & file to 3.5% (from 4.25%). These rates are the same for unpaid CT after 1 October 1993.

· On overpaid CT for accounting periods ending on or after 1 October 1993 to 0.5% (from 1.25%)

· On unpaid CT for accounting periods on or after 1 July 1999 (other than underpaid instalments) to 4.5% (from 5.5%)

· On overpaid CT after 1 July 1999 for periods after the normal due date 1% (from 2%)

Default Interest (mainly relating to underdeclared VAT / Late payments of Customs Duty etc)

· The rate of interest changes from 5.5% to 4.5%

Statutory Interest (mainly relating to VAT and other indirect taxes)

· The rate of interest in respect of official error changes from 2% to 1%


Case Studies

The Tax Man

Minimise the stress of an investigation and make use of our extensive experience in securing best outcome for our clients

Business Valuation in Distress

Take advantage of our impartial and rigorous due diligence procedures

FD in The Cupboard

Our innovative ideas are here to improve your business performance and secure appropriate and cost effective funding

The Tax Man

The Tax Man

A new client was introduced to us via a recommendation with whom we arranged to meet on a regular basis in order to determine a number of changes that we felt were needed to their business structure. The client was at the time operating as a husband and wife partnership. The business was flourishing and had a number of large contracts with big organisations.

At the start of the process they were still heavily immersed in their day to day operations so we can get a full flavour for their ambitions, aspirations and growth plans. We quickly recognised there were sufficient tax savings which can be achieved by changing the structure from a partnership to a corporate entity. We carried out a business valuation and disposed of the goodwill from the old to the new business. Unfortunately, as often is the case with efficient tax planning, HMRC got involved and disputed our valuation.

An HMRC investigation can be a very stressful time for any client, even for those best prepared. However, our client had minimal input in the HMRC communication as we dealt with this professionally behind the scene. As an added benefit, our client could rest on the security that all work was covered by insurance and therefore all costs and time in dealing with this enquiry were covered by the fee protection policy we had put in place.

The initial approach taken by HMRC was very aggressive and they tried to present an argument that there was no goodwill in the business. We challenged HMRC’s view that the goodwill was worthless. After lengthy correspondence and numerous telephone calls, HMRC agreed 100% with our original valuation, which preserved our original tax saving plan for the client. Tax savings on this case where in the region of £75K at the outset, with ongoing savings of £6,000 per annum. We are pleased to add another happy client to our portfolio.

Business Valuation in Distress

Business Valuation in Distress

Selling a business is never an easy process, but when disputes arise, the need for a reliable third party due diligence process is even greater.

Tearle & Carver have extensive understanding of the requirements for remaining objective when managing a potentially difficult company buyout. In one such case, we were approached by the courts to act as independent accountant for an acrimonious business sale in which one partner was exiting the business and selling shares to the other. Given the circumstances, both sides had totally polar views of what their business was worth.

After arranging an initial meeting with the company, we were thorough in ensuring we completed due diligence, validating the figures in the accounting records, carrying out adjustments where appropriate, and drafting a set of reliable management figures within the framework required by the court.

A draft version of the report detailing our findings and conclusions was submitted to both parties, giving them the opportunity to voice any queries or concerns and ensure all relevant factors had been taken into account.

Through this process, we were able to submit a final report to the courts that was both binding and acceptable to both parties, effectively resolving what could otherwise have been a time consuming and costly process for all sides.

FD in The Cupboard

FD in The Cupboard

For smaller companies, it is often not possible or cost effective to pay for a full-time Financial Director.
Many of our clients therefore make use of Tearle & Carver’s extensive expertise to provide the services of an FD as and when required.

In this case, we were approached by the management team of an organisation looking to acquire the existing business via an MBO (Management buy out). Their business plan had proved ineffective for securing funding, and what they needed was financial expertise from someone with a developed understanding of the company’s internal workings.

Tearle & Carver helped deliver the solution our clients were looking through utilising our bank contacts in order to make the MBO viable, while also building a robust business plan and preparing our client for the rigorous vetting process. To help with cash flow issues, we introduced factoring which led to improved cash flow management.

We advised on the appropriate business valuation and structure, and continued to prepare monthly accounts to track profgress once the management were fully in command of all the information they needed to move their business forward.

In order to best assist these clients through the crucial first year of ownership, we attended board meetings on a regular basis, a service that we continue to provide to date.

With our continually developing understanding of their business, this client is able to remain confident that Tearle & Carver can provide any financial support they may need, now and in the future.