Freelancers hit by ‘unfair’ taxman interest charges

The tax man has been accused of “stacking the deck in its favour” after it raised interest charges on owed taxes but not on refunds.

Incomes for struggling freelancers will be further hit after HM Revenue & Customs upped the rate at which interest builds on tax debts, from 2.75pc to 3pc. This was after the Bank of England increased central rates from 0.25pc to 0.5pc earlier this month. 

However, the rate paid by HMRC when it refunds miscalculated and overpaid tax has remained frozen at just 0.5pc. This has not risen since 2009.

Phil Kinzett-Evans of tax firm UHY Hacker Young said it was “unfair” and claimed the Government was “taking advantage” of hard-hit freelancers.

“It’s one rule for HMRC and another for taxpayers. The debt rate is directly linked to the Bank of England, so the refund should be too. Anything else smacks of the taxman stacking the deck in its favour,” he said.

“As interest rates continue to climb, the gap between the two rates is only going to get worse. HMRC really should volunteer to bring them back in line as right now, it looks like it is taking advantage,” he added. 

HMRC said the late payment rate rises automatically as the Bank Rate does while the refund rate is set at its discretion. It said the latter, paid to ensure taxpayers are not out of pocket when overpaying, would not increase until the Bank of England raised its rate to 1.5pc, not expected until 2023.

By this point the charge on late payments would be 4pc meaning HMRC would earn 3.5 percentage points profit on what it charges versus what it pays.

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