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HMRC internal manual

COTAX Manual

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HM Revenue & Customs
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Interest: how interest is calculated: clerical calculation of late payment interest

COTAX does not automatically calculate and charge late payment interest where the ‘clerical interest’ indicator (CII) is set.

Late payment interest is also not calculated and charged automatically where:

  • COTAX is unable to calculate interest correctly on a carry-back (Word 32KB) or for S458 CTA 2010 (formerly S419(4)ICTA 1988) relief or
  • there is a ‘date struck off’ on the record and that date has passed or
  • the number of interest accruals is greater than 200.

Interest under Section 87A TMA 1970 is not charged on either:

  • penalties or interest itself or
  • tax which is stood-over or suspended.

CIIW (Clerical Interest Indicator) work list

Cases appear on CIIW (Clerical Interest Indicator Work List) in Debt Management Offices and the CT Unit Cumbernauld in the following circumstances.

  • An operator has set the CII to ‘Y’ and the tax is paid but no manual interest charge has been raised.
  • COTAX sets the CII to ‘Y’ automatically, either after a carry-back leading to repayment or reallocation, or where a claim was received under S458 CTA 2010 (formerly S419(4) ICTA 1988).
  • The number of interest accruals is greater than 200 and COTAX has set the CII to ‘Y’ automatically.

COM81000 has more information about these work lists.

Raising a manual interest charge on COTAX

The CT Unit Cumbernauld and Debt Management Offices use function RMIC (Raise Manual Interest Charge) to raise or amend a late payment interest charge on COTAX. It is calculated on any tax paid late from the normal due date (Word 49KB) for the AP to the:

  • effective date of payment (EDP) if the company is still live or in voluntary liquidation
  • date of liquidation for all other types of insolvency.

You can only use this function for charges where the number of interest accruals is 200 or less. Where the number exceeds this, the charge needs to be raised on the SAFE system.

Before you amend an interest charge, you must get authority on the appropriate form.

  • AZ44, 987, IRU1 in the CT Unit Cumbernauld.
  • AZ63 in Debt Management Offices.

The form will tell you why the original calculation was wrong.

You do not need this authority if you work in a Debt Management Office and are responsible for lodging the HMRC claim in Insolvency cases.

Function RMIC (Raise Manual Interest Charge) is used to raise or amend an interest charge clerically as follows.

In the CT Unit Cumbernauld where the CII is set to ‘Y’ and the Pursuit Status is:

  • RFI or PRFI
  • LA, LA-ENF or PLA and COTAX is unable to calculate interest correctly on a carry-back or where S458 CTA 2010 (formerly S419(4) ICTA 1988) relief has been granted.

In Debt Management Offices where the CII is set to ‘Y’ and the pursuit status is LA, LA ENF or PLA, except cases where COTAX is unable to calculate interest correctly on a carry-back or where S458 CTA 2010 relief has been granted. The CT Unit Cumbernauld handle the clerical interest calculation in those cases.

Function RMIC is the only interest function that updates the company’s COTAX record.

Function CINT (Compute Interest) is an interest calculator that provides a computation of interest for late payment interest. The interest computation is based on the notional dates and amounts entered on to the screen.

You do not need to enter a company reference as details of the computation do not update the company record.

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Raising a manual interest charge on SAFE

Where the number of interest accruals is greater than 200, COTAX is unable to calculate and raise the charge either automatically or manually. When this happens, COTAX automatically sets the CII to ‘Y’ and puts the case on CIIW (Clerical Interest Indicator Work List). You need to calculate the interest charge clerically and arrange for it to be raised on the SAFE system.

See COM81000 for more information about this work list.

If you receive an objection to the interest charge, see COM82000.

See:

  • COM80011 for a list of forms relevant to this subject
  • COM80012 for a list of functions to use in particular situations
  • COM80013 for legislation applying to this subject.