HMRC has revised interest rates with late payment bills charged 7.75% from 22 August, the highest rate since 2001

The late payment and repayment interest rates follow the rise in the Bank of England base rate to 5.25% on 3 August and are applied to the main taxes and duties that HMRC currently charges and pays interest. The rates will rise to:

• late payment interest rate — 7.75% from 22 August 2023
• repayment interest rate — 4.25% from 22 August 2023

This means that the late payment interest rate will increase by 0.25% to 7.75% from 22 August. The last rate increase was on 11 July. Rates were last this high in August 2007.

Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gain tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 7.75%.

Repayment interest will also be increased from the current 4% rate to 4.25%.  

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rises to 6.25% from 6% for the earlier date of 14 August.

With late payment interest now 2.5% above the Bank of England base rate, HMRC continues to pay lower interest to taxpayers affected by overpayments of tax at 4.25%, up from 4%.

The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments rises to 5% from 4.75% from 14 August.

Following a trial, messages on the estimated time it will take to speak to an adviser were extended to more HMRC helplines from 4 July

The message will be played at the start of the call so taxpayers can make an informed choice about whether they want to hang on, use HMRC’s online services or call back another time.

During the trial period, it was clear that callers abandoned calls as the average wait time halved from 40 to 20 minutes. HMRC did not provide figures on how many callers refused to wait for a call handler and used alternative HMRC services to resolve queries, or called back later when lines could have been less busy.

Call wait time messages are based on the previous day’s average and will be included on the following helplines:

• child benefit; 
• Construction Industry Scheme;
• employers;
• National Insurance;
• online services;
• tax credits; and
• VAT. 

In the update in the latest stakeholder digest, HMRC said: ‘Expected call wait times are already given on the PAYE helpline. This has proved successful with a significant number of customers choosing to leave the queue and resolve their query elsewhere.

‘We’ve been able to take more calls from customers who still need to speak to us, and wait times reduced from 40 minutes at the start of the trial, to consistently below 20 minutes.

‘We want to be open and transparent about how long our customers can expect to wait and encourage the use of our digital services which are quicker and easier than calling us.’

Late last month HMRC announced plans to shut the self assessment helpline over the summer and transferred the 350 call handlers to other telephone services during the three-month closure. HMRC argued that the decision was taken to improve overall customer service levels which have come under fire as agents, accountants and the public have faced lengthy waits to access HMRC call centres.

HMRC is in the midst of a major back office IT upgrade, which involves moving more services to cloud-based platforms to improve response times.

HMRC service levels continue to decline as only 61% of callers managed to get through to an adviser by phone in the latest performance report

This marked a 10% decline in successful call connections from an average of 71% over the period April 2022 to March 2023. In the month HMRC received nearly four million calls with 2.9m wanting to speak to an adviser. The previous month HMRC said it had only received 3.23m calls.

On average it took nearly 21 minutes (20:59) to answer calls, while more than two thirds (69%) of callers waited more than 10 minutes to get through to an HMRC adviser.  

In March 2023, the 61.3% of positive call connections marked a significant decline from 66.1% a year ago. In November last year, HMRC managed to answer 78.4% of calls, illustrating a worrying drop in service levels over the five month period.

Despite HMRC’s attempts to direct people to web services and webchat to answer queries, there is still very high demand for advice from HMRC staff.

There was also a fall in caller satisfaction with HMRC phone service declining by less than 4% to 75.7% although this figure includes all interaction with phone, webchat and digital services. However, this was the lowest score recorded in the last 12 months.

Recently HMRC said it was transferring call centre staff to handle the huge backlog of post as the performance report showed that 10% of post took more than 40 days to deal with.

ICAS chief executive Bruce Cartwright said: ‘Our members are increasingly telling us that they face severe delays and frustration when dealing with HMRC. Poor HMRC service levels are having a significant impact on taxpayers and businesses.

‘We and other professional bodies, continue to urge the government to invest more in HMRC to make sure they have enough resources to deliver at least an adequate service. Right now, this just isn’t the case.

‘Without an increase in funding and resources, HMRC seems unable to improve their service and support to taxpayers to acceptable levels.’

The government plans to move rapidly to a digital only approach to communications with HMRC to reduce admin costs and cut use of call centres

To achieve this the government intends to reform the rules about how taxpayers give consent to communicate digitally with HMRC by making it the default position.

The changes are in line with HMRC’s longer term strategy to increase the use of self-serve and digital channels and to provide services that are ‘easy to use, with increased support to remove barriers to digital services where appropriate’.

It also admits that HMRC guidance needs to be improved to make it more accessible and understandable for taxpayers.

In future, HMRC will provide less choice around the non-digital channels it offers to taxpayers such as telephone calls and post to reduce the use of these channels, where users are able to go digital.

HMRC’s aim is to improve the range and accessibility of its digital services and move as much taxpayer interaction to self-serve digital channels as possible. At the same time, HMRC will look to increase automation and the ability to self-serve in its non-digital channels wherever possible, while providing support for those who need it.

Many taxpayers already do some of their tax online, using their personal tax account, business tax account and the HMRC app. ‘As these services have been developed separately over the last few years, they have not always offered a unified and consistent experience to taxpayers,’ HMRC said.

As part of the overhaul, HMRC aims to introduce a new single customer account for all taxpayers.

HMRC aims to implement its first phase of transforming digital services through the single customer account by 2025. This will focus on transforming services for individual taxpayers and account functionality, with business needs addressed in later phases.

Part of the plan will focus on improving sign in, security and subscription to digital services. HMRC will also start rolling out features to enable taxpayers to change their details (phone numbers, emails, address, marital status) online in a single place and have those changes apply to all services to which they are subscribed.

The proposals also aim to reduce the volume of post sent out by HMRC, which currently sends around 70 million items by post annually, at a cost to the taxpayer of around £40m.

Over the next two years, HMRC will start to reduce the higher volume letters and forms it sends out on paper and will instead provide these through digital channels. It will also do this for some key inbound forms.

It has already confirmed that it will require the minority of digitally capable employers who still submit P11D and P11D(b) forms (reporting employee benefits and expenses) on paper to use online forms from April 2023. It will then move to providing digitally capable employers with P6 and P9 coding notices solely using digital methods.

HMRC is seeking views on whether all, but digitally excluded taxpayers should be required to register for income tax for self assessment (ITSA) online, through their digital tax account.

Using the digital by default approach, HMRC would assume consent from the taxpayer to receive future ITSA communications digitally, unless they opted out. HMRC would then deliver the taxpayer’s first notice to file digitally and require the first and subsequent annual ITSA returns to be delivered digitally.

Before implementing these changes HMRC said it would ensure there was a high level of taxpayer satisfaction with the digital registration service. It also said there would be sufficient advance notification of the move with advance communications with agents, accountants and taxpayers.

There are also plans to reform the repayment process with a push to digital only approach.

Recent research found that participants were keen to see fewer steps in the repayments process and some found the sign up and authentication process to be a barrier and were keen to see a simplified approach.

There was also low awareness of the process for claiming repayments digitally and taxpayers said that P800 notifications could often be missed or not acted upon.

On PAYE overpayments, HMRC plans to contact taxpayers to offer a choice between receiving a digital payment or requesting a payable order instead of sending a payable order after 21 days if the taxpayer takes no action.

This will help to prevent payable orders being sent to incorrect addresses and will allow taxpayers to self-serve and get their repayments more quickly, which will also reduce HMRC’s printing and paper costs.

HMRC is also looking at ways to improve the accuracy of tax codes and wants to better understand how it can try to get tax codes more reflective of an individual’s circumstances more quickly when circumstances change through job moves and additional of employee benefits such as company cars.

HMRC has issued a reminder to millions of married couples to make sure they are claiming the £1,260 marriage allowance tax break

While more than 2.1 million couples claim marriage allowance, HMRC estimates that up to 2.4m couples are missing out because they do not realise they may be eligible, particularly couples where one partner has retired, has given up work to take on caring responsibilities, or is unable to work due to a long-term health condition.

All claims should be made on HMRC and do not use a third party provider as they will take a large cut of the allowance through commission fees.

Marriage allowance is worth up to £252 a year, equivalent to around 10% of an individual’s tax-free personal allowance. The maximum amount that can be transferred to their husband, wife or civil partner is dependent on the personal allowance for that tax year.

It is worth noting that claims can be backdated to April 2018.

Taxpayers earning less than £12,570 a year can transfer up to £1,260 of their personal allowance to their higher earning partner, to reduce the amount of tax they pay. They can backdate their claim to include any tax year up to 6 April 2018, which could be worth up to £1,242 in tax relief.

Trusha Shah, tax manager at HW Fisher said: ‘It might not be the most romantic reason to propose, but there are tax benefits to consider if you are getting married. Eligible married couples, or those in a civil partnership can reduce their tax by up to £252 via the marriage allowance.’

Couples can use the marriage allowance calculator on gov.uk to check if they are eligible for the tax break.

Angela MacDonald, HMRC’s deputy chief executive, said: ‘We want every eligible couple to benefit from marriage allowance tax relief. Couples whose circumstances have changed – perhaps one of them has stopped working or taken a lower paid job – may not realise they are entitled to claim.

‘It’s easy to find out what you may be due – search ‘marriage allowance calculator’ on gov.uk to get started. By applying on gov.uk, rather than through a third party, you get to keep 100% of the tax relief due.’

Couples could claim marriage allowance if the following criteria applies:

• married or in a civil partnership;
• do not pay income tax, or their income is below the personal allowance of £12,570;
• their partner pays income tax at the basic rate – which typically means their income is between £12,571 and £50,270.

Married allowance can be cancelled on gov.uk if a couple’s circumstances change.

A recruiter, a pension administrator and a payroll services provider all avoided tax bills totalling £13.8m and face millions of pounds in fines from HMRC

During the month of November, HMRC identified £13.8m in unpaid tax by the businesses and individuals named in the quarterly deliberate defaulters’ list, £3.2m less than the £17m that was identified in the last quarter.

HMRC’s list names over 100 individuals and businesses who have failed to pay their taxes and been identified in the last three months.

In November, the level of penalties handed out amounted to £8m in total for outstanding tax evasion, as HMRC hammered down on deliberate tax defaulters.

At the top of the list of deliberate tax defaulters was a real estate agent who failed to pay a tax bill of £2,695,693 over a four-year period between April 2014 and 2018. Simon Karimzadeh, sole director of Euroland 3, now faces a penalty of £1,227,997 related to income from capital gains.

According to Companies House, Karimzadeh is listed as the director of Euroland 3 Limited, Euroland 2 Limited, and Euroland 1 Limited, which are all still active and trading. The companies buy and sell real estate.

Second place goes to a former technology consultant who failed to pay £993,729.79 in tax payments between April 2010 and 2019. Stephen Bernard Wheatley, former director of Westward Technology Limited and Qorbis Holdings Limited, received penalties amounting to £457,555.08.

In the meantime, a pension administrator failed to pay £729,596 worth of tax between April 2018 and 2020. Based in London, Avril Patricks Stewart Limited entered into compulsory liquidation in February 2011, and was fined £491,831.44 for unpaid tax by HMRC.

A recruitment and payroll service provider has been fined £533,270.96 for tax evasion over a two-year period. Arrow Logistics Ltd, based in London, failed to pay £627,377.61 in tax between April 2020 and 2022.

Bolton-based payroll services provider Ditto Payroll Ltd takes the fourth spot after not paying £542,238 worth of tax between April 2020 and 2022. HMRC handed the business a £515,126.31 fine and the group entered into a creditors voluntary liquidation in April 2021.

In addition, an international telecoms company called Akal Nation Limited based in London avoided paying £381,038 worth of tax between February and July 2019. HMRC handed the business a £220,049.44 fine.

Finally, a printing company based in Bradford avoided £359,358 in tax payments. A&S Printers was fined £211,122.66 by HMRC for tax evasion over a 10-year period, between May 2010 and July 2020.