There are now alternative ways of dealing with payments of provisional tax and you may be interested in utilising one of these alternative methods. They are a) depositing your funds into a tax pooling account and b) borrowing your provisional tax at low interest rates.
As a result of the significant difference between use of money interest rates, currently credit balances earn 1.82% while debit balances are charged 8.91%, the government allowed certain companies to establish themselves as tax pooling providers.
The tax pooling provider receives provisional tax payments and holds them on account of the tax payer. The pooling provider, under strict guidelines established with a trustee company, is able to trade provisional tax amongst tax payers.
The result is that if you've short paid taxes, you can buy the shortpaid tax at a much cheaper interest rate than 8.91%. If you've overpaid taxes, you can sell the overpayment at a better interest rate than 1.82%. Please note that buying and selling tax is subject to availability as the pool needs to hold funds to meet requests. The other advantage is that if provisional tax is overpaid, we can generally organise to have this refunded at short notice.
In addition to being able to buy and sell taxes within the pool, Tax Pooling Solutions Limited (the company we deal with) also gives you an ability to finance your taxes at a very reasonable interest rate.
Tax pooling is an efficient way of dealing with tax payments, particularly for companies and trusts as these entities are liable to use of money interest on underpayment and receive use of money credits on overpayments.
Tax pooling minimises the impact of these UOMI charges. Tax financing is worth considering as it should reduce the finance costs (cheaper than overdraft), particularly through the winter months.
For additional information on tax pooling and tax financing please visit the Tax Pooling Solutions website.
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