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HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
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Payment allocation, overpayments and repayments: payment allocation: customer requests to reallocate payment

A customer may ask you to reallocate payments after the initial allocation. The usual reason behind such requests is to minimise interest.

Where HMRC choose how the payment is allocated, the payment can be reallocated at the customers request at any point up to when HMRC communicates the allocation of payment to them. However after this point, or once the customer has exercised their right to choose the allocation at the time of payment, both parties are bound by it.

There is no right of appeal against payment allocation. We follow normal commercial practices in allocating payments against liabilities in existence at the time of receipt of the payment, starting with the oldest Statutory Due Date first. So unless falling within the guidelines below, payments must not be reallocated and the request must be refused. The only option for the customer is to seek Judicial Review.

Specified Allocation

In certain circumstances a payment needs to be linked to a specific charge. This happens in:

  • enforcement cases - see DMBM210115 
  • cases where the customer requested a specific allocation at the time of making the payment - see DMBM210105.

Where you receive a request to reallocate in either of the above circumstances, and there is clear evidence to support the customer’s view, then allow the reallocation.

Incorrect Allocation following the Automatic Allocation of a Payment

There will be cases where an incorrect allocation is identified following the automatic allocation of proceeds, for example:

  • from a Certificate of Tax Deposit
  • where a payment is allocated to a charge with a future relevant due date at the expense of a charge on which interest is accruing
  • where payments originally allocated to a specific year are automatically reallocated following an amendment (for example, where an amendment to a previous year increases the Self Assessment payments on account but reduces the balancing charge for the following year).

If this happens you should reallocate the payment.