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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: credit or debit interest: clerical charge (CT Unit Cumbernauld) (Action Guide)

To raise or amend a credit interest and debit interest charge in the CT Unit Cumbernauld consider steps 1 - 39 below.

The guide is presented as follows.

Preliminary action Steps 1 - 5
   
Entry appears on the CDIW work list Steps 6 - 11
Incorrect EDP used for charging credit or debit interest Step 12
Claim for calculation of credit or debit interest before NDD - QIP case Steps 13 - 16
Claim for calculation of credit interest before NDD - non QIP case Steps 17 - 21
Clerical calculation of credit or debit interest following reallocation out of COTAX Steps 22 - 25
Supplementary tax on North Sea Oil companies Steps 26 - 27
Calculation displayed on function RMIC screen COT107G dialogue box showing credit or debit interest accrual details is correct Steps 28 - 31
Calculation displayed on function RMIC screen COT107G dialogue box showing credit or debit interest accrual details is incorrect Steps 32 - 36
AP is overpaid after raising or amending a clerical credit or debit interest charge Step 37
AP is underpaid after raising or amending a clerical credit or debit interest charge Steps 38 - 39

Preliminary action

1. Before you raise or amend a credit or debit interest charge you must have authority to reduce overcharged interest on forms AZ44 or IRU1.
   
  You must not raise a credit or debit interest charge clerically unless you have the appropriate authority.
2. Use function VPPD (View Payment and Posting Details), view AP summary screen to confirm the following:
  * the company’s self assessment is recorded or a revenue determination has been made
  * the normal CT due date (Word 49KB) for the AP has passed, unless you are dealing with a claim for early calculation of credit interest (Word 30KB) before the normal due date, see steps 13 to 21
  * the AP is subject to clerical pursuit.
  Take screen prints of the postings screens. You will need these later at step 28.
3. Where the AP is not subject to clerical pursuit, use function RAPP (Revise AP Pursuit) to set the’ ‘RFI’ signal.
4. Use function DAPD (Display AP Details) to check if the ‘quarterly instalment payment’ (QIP) signal is set to ‘Y’.
5. Where the ‘QIP’ signal is set to ‘Y’, use function DINT (Display Interest Computation) to confirm:
  * the quarterly instalment amounts
  * the quarterly instalment due dates (Word 42KB).

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Entry appears on the CDIW work list

6. Use function CDIW (Credit Interest Work List) to display the work item.
   
7. Select the [View] button to see all available details for the case including the reason for entry onto the list.
8. Use function VPPD (View Payment and Postings Details) to display the payment and interest postings for the AP.
9. Use function RMIC (Raise Manual Interest Charge) to raise or amend the credit or debit interest charge.
10. See step 28 if the interest accrual details are correctly displayed in RMIC.
11. See step 32 if the interest accrual details are incorrectly displayed in RMIC.

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Incorrect EDP used for charging credit or debit interest

12. If the wrong EDP has been used to calculate credit or debit interest, use function AEDP (Amend Effective Date of Payment) to correct it.
   
  By amending the EDP, COTAX automatically recalculates the credit or debit interest to the correct date unless the ‘credit / debit interest’ indicator (CDII) is set. Where this signal is set, see steps 32 to 33 on how to amend the interest charge.

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Claim for calculation of credit or debit interest before NDD - QIP case

13. Where there is still an amount of tax outstanding, you should advise the company that this must be paid before you can calculate any credit or debit interest due.
   
14. Where an overpayment still exists on the AP, contact the CT responsible office and ask them, where possible, to deal with this first so you can include the excess payments in your interest calculations.
15. Use function VPPD (View Payment and Posting Details), view AP summary screen to confirm:
  * a self assessment or amendment has been made
  * the AP is subject to clerical pursuit
  * the tax charge has been settled in full.
  Take screen prints of the postings screen.
16. Use function RMIC (Raise Manual Interest Charge) to calculate and raise credit interest.

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Claim for calculation of credit interest before NDD - non QIP case

17. Where there is still an amount of tax outstanding, you should advise the company that this must be paid before you can calculate any credit interest due.
   
18. Where a nil tax charge has been recorded, you should ensure that all the tax has been either repaid or reallocated before making your calculation.
19. Where a positive tax charge has been posted you need to advise the company that you cannot calculate the full amount of credit interest due until the NDD has been reached because the NDD is in the future and there may be interest rate changes.
20. Use function VPPD (View Payment and Posting Details), view AP summary screen to confirm:
  * a self assessment or amendment has been made
  * the AP is subject to clerical pursuit
  * the tax charge has been settled in full.
  Take screen prints of the postings screen.
21. Use function RMIC (Raise Manual Interest Charge) to calculate and raise credit interest.

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Clerical calculation of credit or debit interest following reallocation out of COTAX

22. If the money was allocated in error to the AP then you should calculate credit or debit interest but do not include that payment in your calculation.
   
23. If the money was correctly allocated to the AP and has subsequently been repaid through OAS, you should calculate credit or debit interest and include that payment in your calculation up to the date of repayment or the normal due date, whichever is the earlier.
24. If the money was correctly allocated to the AP and has subsequently been reallocated to another COTAX record, apply common period rules and calculate credit or debit interest according to the rules. COM80200 onwards has guidance on how to apply the rules.
25. If the money was correctly allocated to the AP and has subsequently been reallocated to another head of tax, for example PAYE, then common period rules do not apply and you should calculate credit or debit interest up to the date of reallocation or the normal due date whichever is the earliest.

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Supplementary tax on North Sea Oil companies

26. Where function RMIC displays a message indicating that the AP straddles the transitional period for the introduction of the supplementary tax on North Sea Oil on companies, select the [S501A] button to view the additional instalment details.
   
27. Once you have viewed the additional instalment details, you need to return to the previous screen by selecting the [OK] button to perform or correct the interest calculation. See step 28 where the interest accruals are correct and step 32 where the interest accruals are not correct.

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Calculation displayed on function RMIC screen COT107G dialogue box showing credit or debit interest accrual details is correct

28. If the details displayed on screen COT107G dialogue box (accessed by selecting the [Accruals Details] button) are correct, raise a clerical credit or debit interest charge by entering ‘Y’ in the ‘raise / amend interest charge as calculated’ field.
   
29. If you are not sure that the details are correct, exit the function and check the calculation using function DINT (Display Interest Computation).
30. When you have raised a credit or debit 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 step 37.
31. 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 credit or debit interest charge, see steps 38 - 39.

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Calculation displayed on function RMIC screen COT107G dialogue box showing credit or debit interest accrual details is incorrect

32. If the details displayed on screen COT107G dialogue box are incorrect, you should:
   
  * select the [Cancel] button to return to screen COT107G
  * select the [Print] button to obtain a screen print
  * select the [Accrual Details] button to display the dialogue box again
  * review the details (Word 75KB).
33. Revise the details from the dialogue box screen by:
  * selecting an entry
  * selecting the [Amend Accruals] button
  * selecting the [Amend] or [Delete] button as appropriate
  * entering the correct computation amount and accrual to date on the second dialogue box, manual interest calculation details
  A new entry may be made by:
  * selecting the [Amend Accruals] button
  * selecting the [Add] button
  * entering the correct computation amount and accrual to date on the second dialogue box, manual interest calculation details.
  Alternatively you can use RMIC to do a full recalculation by selecting the [Payments] button. This allows you to enter details about the AP and the payments made. From these details COTAX calculates:
  * the instalment due dates
  * the instalment amounts
  * credit or debit interest due.
34. Check the revised calculation displayed on screen COT107G dialogue box carefully and, if correct, raise a credit or debit interest charge by entering ‘Y’ in the ‘raise or amend interest charge as calculated’ field.
  If the calculation is still incorrect, repeat steps 32 and 33, or abandon the function.
35. When you have raised a credit or debit 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 step 37.
36. 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 credit or debit interest charge, see steps 38 to 39.

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AP is overpaid after raising or amending a clerical credit or debit interest charge

37. Where function VPPD (View Payment and Posting 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 clerical credit or debit interest charge

38. Where function VPPD (View Payment and Posting Details), view AP summary screen shows an amount underpaid:
   
  * issue a full series of payment applications clerically for the tax, penalty and late payment interest that function VPPD (View Payment and Posting Details) shows as collectible on view AP summary screen
  * include the net debit interest in the amount of any late payment interest due and treat the net credit interest as a payment.
39. After issuing the full series of clerical payment applications:
  * 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.