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HMRC internal manual

Debt Management and Banking Manual

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HM Revenue & Customs
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Interest: handling interest objections and enquiries: general information

Basis of calculation

Although there are several functions available for calculating interest, the basis of calculation

is the same:

£amount (including pence) x interest rate x number of days/ 366.

You can use this formula if you have to calculate an interest charge when you do not have access to HoD systems

Interest is charged

  • for the number of days from the due and payable or reckonable date to the date of payment
  • for the due date but not for the day on which payment is made
  • at the actual rate in force on the rate change day.

The `effective’ date of payment may be earlier than the date of receipt (see DMBM201020).

Overview

If tax is paid late we have a statutory obligation to charge interest.

There is no appeal route for disputes about interest. But we will, in certain circumstances, consider giving up some or all of the interest if a customer objects to the charge or a review identifies that a HMRC mistake or unreasonable contributed to some or all of the build-uo of interest.

In the first instance you should deal with enquiries about, and objections to, an interest charge locally.

Exceptionally, you can cancel or revise a charge where this was made incorrectly. But only the Interest Review Unit (IRU) can agree to set aside the payment of a correctly raised interest charge.

Enquiry or objection

An enquiry is a question of a general nature for example about the rate of interest or the period for which it is charged. Your response will normally be factual.

An objection is when

  • the relevant date or effective date of payment is disputed
  • a claim is made that mitigating circumstances apply
  • legislation is questioned
  • an explanation to an enquiry is not accepted.

Objections fall into two main categories

  • disputes over the facts determining the calculated charge, for example an incorrect effective date of payment dealt with locally
  • pleas for waiver or reduction to correctly raised charges due for example to ignorance of the rules or alleged delay. If relief is offered in such cases the adjustment is dealt with by remission authorised by the IRU.

Referral to IRU

Any objections that you cannot resolve locally should be passed to the IRU for review: except for CT and PAYE cases where the interest is under £100.

The IRU will only accept cases where the interest charge is final that is it is not accruing.

The Interest Review Unit (IRU)

The IRU is a specialist unit based in Cumbernauld that looks at cases of disputed interest, charged as a result of late payment.

Further information

The IRU site provides further information on the type of interest objection you may receive and on what the IRU does.