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HMRC internal manual

Debt Management and Banking Manual

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HM Revenue & Customs
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Payment Allocation, Overpayments and Repayments: Self Assessment: Objections and Corrections to Interest and RPS: Overview

 

Interest and RPS calculations

An automatic re-allocation of an overpaid amount against a charge, for which the due date has passed, can cause interest and repayment supplement (RPS) to be calculated and included on the customer’s SA record.

Up to 28th January 2000, in particular, this action could disadvantage the customer because the interest and RPS calculations included the same period (the ‘common’ period). Up to this date, any interest was calculated from the due date of the charge to the date of re-allocation and RPS was calculated from the effective date of payment (EDP) to the later of the Relevant due date (RDD) of the charge and the date of re-allocation. Where re-allocation took place after the RDD, the customer was given RPS and charged interest for the common period that runs from the later of the RDD or EDP to the date of re-allocation.

After 28th January 2000, in the majority of cases, any overpaid amount that is re-allocated uses its effective date of payment (EDP) for calculation of interest and RPS and RPS is only given if the customer makes payment earlier than the RDD of the charge.

However, the SA record is to be corrected where you

  • identify that the customer has been disadvantaged by the calculations of interest and RPS for a common period, or
  • receive an objection because of the interaction of interest and RPS.

A correction is to be made regardless of whether the interest and RPS calculations were caused by HMRC error or by the input of data notified by the customer.

The function CLERICAL REALLOCATION can be used to amend a payment allocation on the SA record of an individual or a trust. Any other transfer of a payment, for example to another customer’s account, can be done by transferring the payment from SA to OAS with appropriate disposal instructions.

Preliminary Action

As a first step and before attempting any correction, you should establish when the next statement issue cycle is due to start. Use of the CLERICAL REALLOCATION function immediately updates the customer’s record but if there is any risk that all the actions to correct the customer record may not be completed before the next statement is issued, consider either

  • inhibiting statement issue, or
  • advising the customer that you will be amending the payment record.

If you do not take this action any statement issued could confuse the customer and may prompt an unnecessary enquiry or a payment.

This is only likely to arise when you deal with very complicated reallocations and you cannot finish all the actions on the same day or if you are transferring a payment to another SA record and need to transfer the credit to OAS.

You should examine the record and identify what credit(s) need to be reallocated and then use the function CLERICAL REALLOCATION to reallocate the appropriate amounts.

There are 4 methods of reallocation and each of these works in a different way. However, you will find that AUTOMATIC and REFRESH are the options to use to remove erroneous interest charges.

AUTOMATIC method of reallocation

The Automatic method of reallocation can be used to reallocate any credits that have not been allocated in a logical order by the system. This method uses the automatic allocation rules. Starting with the earliest allocation you can select up to a maximum of twenty allocations in one use of the function for subsequent reallocation.

You should bear in mind that any sum held as unallocated is also utilised in the reallocation.

After using the function in this way, you can check the results using VIEW STATEMENT.

REFRESH method of reallocation

The Refresh method of reallocation can be used to refresh a payment when the system has used the allocation date for calculation of late payment interest rather than the effective date of payment (EDP). On selection of an amount, the system will de-allocate and then reallocate back to the same charge.

A confirmation screen will show you the direct consequences of your reallocation before you finalise your action. To see the full results you should then use VIEW STATEMENT.

If you are in any doubt about the correct course of action, or what amounts to transfer or the sequence in which to carry out the various steps refer to your line manager who can contact the SA Business Help Desk for more information.

Correcting inappropriate amounts of interest and RPS

Interest: To correct the customer’s SA record and dispose of the inappropriate interest you have to refresh or reallocate the payment or payments that caused the interest and RPS calculation. This causes the interest to be calculated correctly to the effective date of payment rather than to the re-allocation date of the overpaid sum

Note: Using function AMEND EFFECTIVE DATE OF PAYMENT does not work in this situation.

RPS: There is no way of reversing the RPS calculation. All the RPS must be transferred to OAS. DMB Banking then arrange disposal of the inappropriate RPS from OAS and transfer any RPS you notify is correctly due back to the SA record.

Before you use function CLERICAL REALLOCATION you should work out exactly what you need to do to correct the customer’s record and then

  • reallocate or refresh the payment or payments that caused the interest calculation. Please bear in mind that any amount credited to the inappropriate interest charge will be re-allocated to any other outstanding charge or any charge becoming due within 45 days
  • you should use function TRANSFER FROM TAXPAYER CREDIT to transfer to OAS any excess RPS
  • check the results of using function CLERICAL REALLOCATION using function VIEW STATEMENT.

An Action Note recording the interest / RPS correction is to be entered in SA Notes.

Notify DMB Banking OAS section

All subsequent action to dispose of the inappropriate RPS will be taken by DMB Banking. You must provide them with full disposal instructions for all amounts transferred to OAS as explained in DMBM210205 and DMBM210210.

Use Form SA 331 to notify these details.

Notify customer

If the customer has received a statement showing the inappropriate amounts of interest and RPS or incomplete information, the correct position should be explained and an apology given for any confusion. You may also wish to provide the customer with a screen print of ‘today’s’ statement

Notes

  1. The procedure explained here may not fit every situation you encounter on an SA customer record. If the case you come across has some unusual features or there are complications, refer to your line manager who can contact the SA Business Help Desk for more information.
  2. There is a system limit to the number of times that you can reallocate one credit. If this limit is reached then the input field will be suppressed. If this happens and the credit still needs to be reallocated, you should use function TRANSFER FROM TAXPAYER CREDIT to transfer the credit to OAS and use form SA331 to provide DMB Banking with full disposal instructions as explained in DMBM210205 and DMBM210210.