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HMRC internal manual

Compliance Handbook

From
HM Revenue & Customs
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Interest: Repayment interest: Allocating payments

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.

Overpaid tax may originally have been paid in several instalments. Before we can calculate repayment interest we need to identify which payments are overpaid, because the date they were originally paid to us affects the start date for repayment interest. We attribute or allocate the overpaid amount to the payments that the person made throughout the tax year.

We allocate overpayments in a strict order. We allocate as much as possible of the overpayment against the first payment in the list below, before moving on to the second, and so on. So we can only allocate part of the overpayment to a payment at 2 below if we have reduced the payment at 1 to nil.

The order in which we allocate payments is:

  1. To any balancing payment, after any ITSA payments on account and/or tax deducted at source, made by the person for that year of assessment (TMA70/S59B).
  2. In two equal parts, to the payments that the person made on account of income tax for that year (TMA70/S59A). To income tax deducted at source for that year. See CH149950 for the meaning of ‘income tax deducted at source’.

In so far as it is able to be allocated to a payment made in instalments, a repayment is to be allocated to a later instalment before being allocated to an earlier one.

See examples at CH146120.

FA09/SCH54/PARA13