1082 Interest on overdue income tax and corporation tax in cases of fraud or neglect

Summary

Where an undercharge to income tax or corporation tax has occurred as a result of fraud or neglect, interest on the tax undercharged is charged, at the rate of 2 per cent per month or part of a month, from the date or dates on which the tax ought to have been paid. This section ceased to have effect for chargeable periods beginning on or after 1 January 2005. However, the section remains active for liabilities arising before that date even where they are paid after that date.

Details

(1) “neglect” has the meaning as set out in section 924(2)(a) for income tax and in section 919(5)(a) for corporation tax.

(2) Where an assessment is made to collect an income tax undercharge attributable to fraud or neglect, the tax undercharged carries interest at the rate of 2 per cent for each month or part of a month from the 1st October in the tax year to which the assessment relates, until payment.

A corporation tax assessment raised in the same circumstances carries the same rate of interest on an undercharge for a month or part of a month as and from the expiration of 6 months from the end of the accounting period in respect of which the assessment was raised until payment.

(3) Section 1080(1) does not apply to tax subject to interest charged at the higher rate under this section.

(4) The provisions of section 1080(2) to (4) apply to the interest chargeable under this section in the same manner as they apply to interest which is charged under section 1080. In addition, in the case of income tax, section 1081 applies to the interest chargeable under this section in the same manner as it applies to interest chargeable under section 1080.

(5) In relation to an assessment made to recover an undercharge due to fraud or neglect —

• the inspector must notify the person assessed that the 2 per cent rate of interest is applicable to the tax charged by the assessment,
• the person assessed may use the normal appeal procedures for tax assessments to appeal the assessment on the ground that interest should not be charged under this section, and
• the rate chargeable under section 1080 (instead of the 2 per cent rate under this section) will apply to the underpaid tax where the appeal is decided in favour of the person assessed.

(6) This section does not apply to tax due and payable for any year of assessment or accounting period that begins on or after 1 January 2005. The section remains fully in force as respects the recovery of unpaid liabilities for earlier years of assessment and accounting periods.

Relevant Date: Finance Act 2021