How does the composite rate of tax work?
The composite rate is a single rate of 40 per cent which can be used as a means of calculating an amount which HMRC will accept in satisfaction of past tax liabilities. The amount will cover all UK taxes (including UK Inheritance Tax, Income Tax, Corporation Tax, Capital Gains Tax, Stamp Duty and Value Added Tax and, without limitation, National Insurance contributions). The rate will be applied to all income, profits, gains and other sums chargeable with no reliefs or other deductions to be allowed. Interest and penalties will be due in addition to the composite rate. The only exception to this is that tax withheld under the European Union Savings directive or under the Agreement on the Taxation of Savings between the EU and Liechtenstein may be offset. You do not have to use the composite rate. You can choose to calculate your liability using the normal rules, which will mean you are able to claim any reliefs and deductions due. You may want to seek advice from your tax agent or advi
