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HMRC internal manual

Compliance Handbook

Interest: Late payment interest: Special provisions: Special provisions for amount: IT payments on account and overpayments - example

You must check whether, and from which date, the FA 2009 interest rules apply to the tax or duty you are dealing with. See CH140160 for full details.

Eileen made two payments on account, each of £5,000, but she made these payments late.

Amount Due date Date paid
£5,000 31 January 2012 4 March 2012
£5,000 31 July 2012 19 August 2012

The tax return shows a liability of £6,000, and therefore there is an overpayment of £4,000.

 

We charge late payment interest because Eileen paid the tax after the due and payable date. We charge the late payment interest only on the amount by which each of the payments on account exceeds 50% of the overpayment. For each of Eileen’s instalments the calculation is:

 

   
Payment on account £5,000
Less 50% of overpayment £2,000
Balance of instalment attracting late payment interest £3,000

The £3,000 equates to half of the final liability.

 

Late payment interest is due on

 

  • one instalment of £3,000 from 31 January 2012 (late payment interest start date) until 4 March 2012 (late payment interest end date), and
  • a second instalment of £3,000 from 31 July 2012 until 19 August 2012.

See CH140220 for how to calculate the number of days.

FA09/SCH53/PARA2