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HMRC internal manual

Debt Management and Banking Manual

Payment allocation, overpayments and repayments: payment allocation: enforcement cases

Where you receive a payment from a customer who is subject to enforcement proceedings, such as:

  • distraint
  • Summary Proceedings (SP) order made
  • County Court Judgment (CCJ) entered
  • statutory demand or Bankruptcy petition pending
  • winding up petition served in England, Wales & Northern Ireland
  • ordinary cause or Summary Warrant in Scotland

it is important that you allocate the payment in accordance with the debts claimed in the proceedings. If you do not you may prejudice further proceedings. Allocate the payment in the following order as shown by the sub-headings below.

Judgment Debts

Allocate to clear Judgment Debts including High Court Judgments, County Court Judgments and Magistrates Orders, in this order:

  • the court fees in each Judgment Debt
  • the court costs in each Judgment Debt
  • the Judgment Debt with the earlier Date of Judgment first, if there is more than one Judgment
  • if the Judgment Debt is subject to Judgment interest, clear this after the other parts of that Judgment Debt and before any later Judgment Debt, tax and other HMRC debts in proceedings, or other arrears.

Tax and other HMRC arrears in Proceedings

Allocate to clear NIC Class 2 first, then tax and other HMRC debts in Proceedings before other arrears in this order:

  • interest bearing liabilities first:

    • allocate to the charge that has been outstanding longest
    • allocate in order of reckonable date, and where the reckonable dates are the same, to Tax before NIC
  • arrears with no reckonable date (non-interest bearing arrears) starting with the oldest
  • allocate to interest only after all interest-bearing arrears have been cleared.

Other arrears

Clear other arrears only after debts in Judgment or in Proceedings have been cleared.

The order of clearing them is the same as for Tax and other HMRC debts in Proceedings shown above.