ACCA Advanced Taxation (ATX) Practice Exam

When does repayment interest run from?

1. Due date and actual payment date

2. Due date and repayment date

3. Actual payment date and repayment date

4. Earlier of due date or payment date to repayment date

The correct answer is: Due date and actual payment date

Repayment interest typically begins to accrue from the due date of the payment until the actual payment date. This means that the taxpayer is liable for interest on the unpaid amount starting from the moment the payment was originally supposed to be made, extending until the point when they actually settle the debt. In the context of tax law, this is crucial for understanding how interest can accumulate on overdue tax payments and the importance of making timely payments. Recognizing the period during which repayment interest accrues can help taxpayers plan their cash flow and avoid unnecessary financial penalties. Additionally, it's essential for tax professionals to accurately advise clients about the consequences of late payments, ensuring they are aware of how long they will be liable for interest on any outstanding amounts. The other options do not accurately represent the way repayment interest is calculated, as they either include unnecessary dates or use incorrect terminology regarding the interest-accruing periods.