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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: late payment interest: clerical charge (CT Unit Cumbernauld) (Action Guide)

To raise or amend a late payment interest charge in the CT Unit Cumbernauld consider steps 1 - 38 below.

The guide is presented as follows.

Preliminary action Steps 1 - 5
   
Entry appears on the CIIW work list Steps 6 - 13
Incorrect EDP used for charging late payment interest Steps 14 - 15
Tax charged reduced to nil Steps 16 - 18
Calculation of interest in struck-off cases Steps 19 - 21
Calculation of interest in insolvency case Steps 22 - 24
Calculation displayed on function RMIC screen COT107C is correct Steps 25 - 30
Calculation displayed on function RMIC screen COT107C is incorrect Steps 31 - 35
Where the AP is overpaid after raising or amending a late payment interest charge Steps 36 - 37
AP is underpaid after raising or amending a late payment interest charge Step 38

Preliminary action

1. Before you amend a late payment interest charge, you must have authority to discharge interest on forms AZ44 or IRU1.
   
2. Before you raise a late payment interest charge where there has been a displacement of a relief as a result of a carry back, or S458 (formerly S419(4)) relief has been given, you must have form CT250(P) from the CT responsible office advising you how to calculate the interest on the carry back.
  You must not raise or amend a late payment interest charge clerically unless you have authority to do so.
3. Use function VPPD (View Payment and Postings Details), view AP summary screen to do the following.
  * Confirm the AP is subject to clerical pursuit.
  * Note the total tax charged, as you will need this when using function RMIC (Raise Manual Interest Charge) later. Take prints of the postings screen as you will need these later.
  * Check the debit interest and credit interest position for the AP.
  * You must ensure when using RMIC (Raise Manual Interest Charge), that you correct the overall interest position, that is late payment and credit or debit interest.
4. Use function RAPP (Revise AP Pursuit) where necessary to make the AP subject to clerical pursuit.
5. Check that you have all the information you need to use function RMIC. Before calculating the late payment interest, you need to knows the total tax charge, the amounts and dates of payment, including any unpaid liability, and whether the company is insolvent.

Entry appears on the CIIW work list

6. Use CIIW (Clerical Interest Work List) to display the work item.
   
7. Select the [View] button to see all the available details for the case including the reason for entry onto the list.
8. Use function VTPR (View Taxpayer Record) to display the solvency details of the company. If the company is insolvent, with the exception of voluntary insolvency, go to step 22.
9. Use Function VPPD (View Payment and Postings Details) to display the payment and interest position for the AP.
10. Where the number of interest accruals are 200 or less, use function RMIC (Raise Manual Interest Charge) to raise or amend the late payment interest charge.
11. Where the number of interest accruals are greater than 200:
  * use function CINT (Compute Interest) to calculate the interest charge
  * contact the Miscellaneous Charges Unit and ask them to raise the charge on the SAFE system
  * use function NOTE (Case Notes) to make a note on the company’s record.
12. See step 25 if the interest accruals are correctly displayed in RMIC.
13. See step 31 if the interest accruals are incorrectly displayed in RMIC.

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Incorrect EDP used for charging late payment interest

14. If the wrong EDP has been used to calculate the late payment interest, use function AEDP (Amend Effective Date of Payment) to amend it unless the EDP relates to an ACT, trade loss or a non-trading deficit carry-back.
   
  By amending the EDP, COTAX automatically recalculates the late payment interest to the correct date unless the ‘clerical interest’ indicator (CII) is set. Where this signal is set, see step 29 below on how to amend the interest charge.
15. Where an incorrect EDP has been allocated to an ACT, trade loss or a non-trading deficit carry-back, use the following functions.
  * RAPP (Revise AP Pursuit) to set the ‘clerical interest’ indicator (CII) to ‘Y’ and, where necessary make the AP subject to clerical pursuit.
  * RMIC to correct the late payment interest charge. See step 33 on how to amend the interest charge.

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Tax charged reduced to nil

16. Where you wish to reduce a late payment interest charge to nil as the tax liability has been reduced to nil, use function RMIC to cancel the interest charge.
   
  * Enter a ‘Y’ in the ‘prepare interest’ field on screen COT107C.
  * Select an accrual and select the [Amend] button.
  * Enter the normal due date as the accrual to date.
  * Repeat as necessary.
17. Select the [OK] button and check that the computation on screen COT107E has been reduced to nil. If not, select the [Prev Panel] button and check that each accrual has an accrual to date the same as the normal due date.
18. Where the computation is nil enter a ‘Y’ in the ‘raise / amend interest charge as calculated’ field.

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Calculation of interest in struck-off cases

19. Where a time to pay arrangement has been made to pay the outstanding tax by instalments in a struck-off case, interest should be calculated using function CINT (Compute Interest) and included in the arrangement.
   
20. Set the ‘clerical interest’ indicator (CII)l using function RAPP (Revise AP Pursuit).
21. Once the tax and interest have been paid in full, take the following actions.
  * Contact the CT responsible office and ask them to remove the struck-off date using function ACTP (Amend CT Payer Details).
  * Use function RMIC (Raise Manual Interest Charge) to raise the late payment interest.
  * Arrange for the CT responsible office to put the struck-off date back on to the record.

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Calculation of interest in insolvency case

22. Where the company is shown as being insolvent, with the exception of voluntary insolvency, interest is charged up to the start date of the insolvency. In voluntary insolvency normal interest rules apply and interest is charged up to the date of payment.
   
  These cases usually appear on the ICHU (Insolvency Claims Handling Unit) work list but there are exceptions such as when there has been a carry-back or S458 relief.
23. Check with ICHU before raising or amending the interest charge as they may be dealing with the case and have already calculated interest and lodged a claim for it in the insolvency. If they have and confirm that the interest cannot be raised or amended, no further action is needed and the case can be deleted from the work list.
24. If ICHU ask you to raise or amend the interest charge, you should use function RMIC to calculate and raise it to the liquidation start date as displayed in function VTPR.

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Calculation displayed on function RMIC screen COT107C is correct

25. If the details displayed on screen COT 107C are correct, raise a clerical late payment interest charge by entering ‘Y’ in the ‘raise / amend interest charge as calculated’ field.
   
26. If you are not sure that the details are correct, enter ‘Y’ in the ‘prepare interest’ field. Select the [OK] button on screen COT107C. Screen COT107D will then display the following details.
  * The date interest has been calculated from.
  * The date interest has been calculated to.
  * The number of days interest has been charged for.
  * The rate interest has been charged at.
  * The amount of interest charged on each accrual.
27. If the details on screen COT107D are correct, raise a clerical late payment interest charge by entering ‘Y’ in the ‘raise / amend interest charge as calculated’ field.
28. If the details on screen COT107D are incorrect, you can either:
  * abandon the function by selecting the [Exit] button or
  * select the [Prev Panel] button to return to the previous screen.
29. When you have raised a late payment interest charge and the AP becomes overpaid, COTAX displays one of two messages telling you what will happen next.
  * Where the overpayment is to be automatically reallocated or repaid.
  * Where the overpayment cannot be dealt with automatically, it advises you which work list the overpayment is on. Where you see this message, see steps 36 - 37 below.
30. Where a message is not displayed, use function VPPD, view AP summary screen. Where the AP remains underpaid or overpaid after you create a clerical interest charge, see steps 36 -37 or step 38.

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Calculation displayed on function RMIC screen COT107C is incorrect

31. If the details displayed on screen COT107C are incorrect because late payment interest is being calculated on any unpaid tax liability to today’s date and this is not right, you can amend the interest charge by charging late payment interest to a different date on the unpaid liability.
   
  * Enter the correct date in the ‘date interest calculated to’ field.
  * Select the [OK] button.
  The unpaid liability is denoted by an asterisk ‘*’ in the unpaid column.
32. Where the details on screen COT107C are incorrect and interest has been or will be calculated to an incorrect EDP, you need to clerically amend it.
  * Enter ‘Y’ in the ‘prepare interest computation’ field.
  * Select the accrual that needs amending and select the [Amend] button.
  * Amend the accrual to date in the dialogue box to the correct date.
  * Select the [OK] button.
33. Check the calculation displayed on screen COT107E carefully and if correct, raise a clerical late payment interest charge by entering ‘Y’ in the ‘raise or amend interest charge as calculated’ field.
  If the calculation is incorrect, select the [Prev Panel] button and revise the details you have entered or exit the function.
34. When you have raised a late payment interest charge and the AP becomes overpaid, COTAX displays one of two messages telling you what will happen next.
  * Where the overpayment is to be automatically reallocated or repaid.
  * If the overpayment cannot be dealt with automatically, it advises you which work list the overpayment is on. When you see this message, see steps 32 - 33.
35. Where a message is not displayed, use function VPPD view AP summary screen to check if an underpayment exists on the AP. Where the AP remains underpaid after you create a clerical interest charge, see step 38.

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Where the AP is overpaid after raising or amending a late payment interest charge

36. Where the overpayment was created as the result of carry-back or S458 CTA 2010 (formerly S419(4) ICTA 1988) relief, contact the CT responsible office and ask them to deal with the overpayment. Make a note of your action on the LOPU work list and enter a suitable B/F date.
   
37. In all other cases where function VPPD (View Payment and Postings Details), view AP summary screen shows an amount overpaid, use either:
  * function REAW (Direct Reallocation Within COTAX) to reallocate the overpayment within COTAX or
  * function REAO (Direct Reallocation Out Of COTAX) to transfer the overpayment to OAS for repayment.

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AP is underpaid after raising or amending a late payment interest charge

38. Telephone the Debt Management Office immediately to tell them the correct interest liability where they have:
   
  * created a clerical late payment interest charge following carry-back or S458 CTA 2010 (formerly S419(4) ICTA 1988) relief and 
  * the pursuit status is LA, LA_ENF or PLA.
  For all other cases:
  * use function RAPP (Revise AP Pursuit) to amend the pursuit status to LA.
  * use function NOTE (Case Notes) to note payment applications issued and the reason why the case is being made local action.