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HMRC internal manual

Compliance Handbook

Interest: Repayment interest: Special provisions for start dates: Income tax deducted at source - 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.

Antonio had both trading income and employment income in 2012-13. His employer correctly deducted PAYE tax from his salary at the top rate of income tax in line with his coding for the year. Antonio made two ITSA payments on account for 2012-13 by the due dates. On 31 January 2014 he also paid a small balancing payment relating to his trading profits, to settle his liability for the year.

Antonio later submits an amended 2012-13 ITSA return to recover an overpayment of tax, due to errors in his original self-assessment. Further expenses were available to reduce his trading profits and create a trading loss, which he wishes to set off against his other income for 2012-13. This means that he is no longer liable at the top rate of income tax for the year.

Antonio has overpaid the tax that he paid as ITSA payments on account and his balancing payment.

We allocate the overpayment first to the balancing payment and then, in equal parts, to the ITSA payments on account following CH146120.

The repayment interest start date for each part of his 2012-13 overpayment follows the general rule, see CH146040, so is the later of

  • the date when the amount was paid to HMRC, and
  • the date the payment became due and payable.

After that we allocate the overpayment to Antonio’s overpaid PAYE tax. Because of the special provision for tax deducted at source, the repayment interest start date for that part of his 2012-13 overpayment is 31 January 2014.