Other news in brief

On 20 November 2024, HMRC published new guidance explaining to businesses how and when to pay Pillar Two top-up taxes (Domestic Top-up Tax and Multinational Top-up Tax). It confirms that a 15-character reference provided at registration must be used (our earlier article discussed the registration requirements) and payments must be made no later than:

• 30 June 2026, if the first accounting period the group is required to report top up taxes ends on or before 31 December 2024;
• 18 months after the last day of the group’s accounting period, if the first accounting period the group is required to report top-up taxes ends after 31 December 2024; and
• The later of 30 June 2026 and 15 months after the last day of the group’s accounting period for all other periods.

On the same day guidance was also published explaining how a business should tell HMRC when it replaces its filing member for an existing Pillar Two top-up taxes account.

A new penalty system for late payment of tax has applied for VAT taxpayers since 1 January 2023 and also now applies to Income Tax Self-Assessment taxpayers using the Making Tax Digital service (either in the pilot that has been running since April 2024, or from mandation from April 2026 onwards). Following an earlier consultation, The Penalties for Failure to Pay Tax (Schedule 26 to the Finance Act 2021) (Assessments) Regulations 2024 were published on 13 November and come into force on 4 December 2024. The earlier consultation stated that these regulations are aimed at taxpayers who “intentionally avoid a second Late Payment Penalty by not paying their tax before the end of the two-year time limit”. This was possible because the legislation previously only allowed HMRC to assess the second late payment penalty once, when the amount of outstanding tax was paid in full, within a two-year assessment time limit. The second late payment penalty is calculated as 4 percent p.a. until the tax due is paid in full. The regulations will allow HMRC to also assess and charge the second late payment penalty where the outstanding tax has not been paid in full, towards the end of the two-year time limit. Only one change was made to the draft that was consulted on, to allow for a second late payment penalty to be charged where ‘time to pay’ (TTP) arrangements are in place and last for longer than the two-year assessment time limit period. In this scenario the penalty will be limited and, so long as the taxpayer hasn’t broken the agreement, the calculation is based on the period prior to the TTP agreement being set up only.

HMRC introduced ‘Guidelines for Compliance’ (GfC) in November 2021 to “offer HMRC’s view on complex, widely misunderstood or novel risks that can occur across tax regimes”. The latest two in the series were published on 7 November 2024. The first, GfC9, sets out the information HMRC recommend is included with a Patent Box computation, as their experience is that some companies do not include enough detail, alongside information on common areas where errors can occur. The document makes it clear that the Guidelines “do not represent any change in the law or HMRC policy”. The second, GfC10, is aimed at employers to help them “identify connected entities, enabling them to report their Apprenticeship Levy liability and claim Employment Allowance correctly”. Again, the aim is to reduce the common errors HMRC see and separate guidance is included for companies, public bodies (and their related entities) and charities.

On 6 November 2024, the Bank of England Monetary Policy Committee voted to reduce the Bank of England base rate to 4.75 percent from 5 percent. As a result, HMRC interest rates for late and early payments have also reduced. HMRC’s late payment interest rate for most taxes is set at the Bank of England base rate plus 2.5 percent, so their late payment interest rate will reduce from 7.5 percent to 7.25 percent. Interest charged on underpaid quarterly corporation tax instalment payments is calculated as base rate plus 1 percent, so this reduces to 5.75 percent. These changes came into effect on 18 November 2024 for quarterly instalment payments and will come into effect on 26 November 2024 for non-quarterly instalment payments. HMRC will also reduce their repayment interest rate for most taxes to 3.75 percent, as it is set at Bank Rate minus 1 percent, with a 0.5 percent lower limit. For interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments the rate is 4.5 percent.

Readers may be interested in the first issue of KPMG UK's new magazine 'BYND'  where industry leaders and experts explore some of the biggest trends and talking points that are impacting business. The focus of the first issue is ‘trust’ and what it means for consumers, business leaders and employees.