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HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
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Interest: Interest Review Unit (IRU): General principles: Unreasonable delay by HMRC

Whether or not payment of interest is set aside where we have caused an error or delay, itis proper to apologise for HMRC shortcomings regardless of whether an apology has beengiven previously.

Interest is charged to recognise who, customer or HMRC, had use of the money after thedate it should have been paid to HMRC. If a customer pays in full on or before theinterest charging date then interest will not be charged. Or, if the customer pays whatthey believe to be a good estimate of the final amount due, any interest charge arising onpayment of any balance will be minimised. Any delay by HMRC in handling a customer’saffairs will then have little or no impact on the amount of interest arising.

Any delay in making payment, regardless of the cause, is to the customer’s advantage,as the funds are available for their use for an extended period of time. So an interestcharge is used to compensate the Government for loss of the use of the funds and to removeany benefit the customer has received, compared to those customers who did pay on time.

It takes time to deal with any part of a customer’s affairs. Some matters may take a shorttime and others, depending on the difficulty, may take a very long time. But the time ittakes HMRC to clear up the various issues being looked at is not seen as a delay no matterhow long this may be. There may be good and valid reasons why it takes the time it does tohandle issues. Again, the time taken should have no bearing if the tax due has been paidon time.

There are many cases of our officers apologising for the delay in replying. The great bulkof these come from a desire to provide good customer service and to recognise that it mayhave taken some time to reply to correspondence. It is not automatically accepting oracknowledging that HMRC has caused any unreasonable delay that means interest should begiven up.

The Interest Review Unit will not consider any period that lies in examples shown below.

  • Before a date from which interest starts to build up.
  • After a relevant payment date ending build up on that payment amount.
  • In a ‘waiting period’ laid down by law. For example, the period allowed for HMRC to open an Income Tax- Self Assessment enquiry.
  • In a ‘waiting period’ specified in HMRC instructions. For example, the periods shown in customer service standards as accepted ‘turnaround’ times for responding to correspondence.
  • In a period where the taking forward of the case was the job of the customer or their appointed representative. Even if HMRC do not send a reminder for responses or try to collect payment, it is the taxpayer’s duty to take the case forward.

It is impossible to give a full list of all the situations where the Interest ReviewUnit may consider giving up interest. The main considerations must be that:

  • interest was increasing during the period involved, and
  • HMRC was responsible for the conduct of the case during the period, and
  • the delay was extensive and unreasonable in the circumstances, and
  • it was only this delay that caused the absence of payment, and
  • the customer was not aware that a debt existed, or might arise, that they should have paid or made a payment on account against.

So if the interest was building up already, or was going to build up, on a delayedpayment as a result of the customer’s actions, then there is no reason for the InterestReview Unit to consider giving up interest. The customer was already going to be facing aninterest charge. HMRC delay, no matter how long, did not cause the charge.

The question to ask for every case is, ‘would the interest charge still have existed ifHMRC had not caused any unreasonable delay?’ If ‘yes’ then the interest charge should beupheld. If ‘no’ then consider giving up interest.

There may be situations where the interest is already building up when HMRC cause delayand this increases the amount of interest to be paid. The Interest Review Unit will onlyconsider giving up or reducing interest for unreasonable delay on any amount of additionaldebt that the customer was unaware of or could not have reasonably foreseen arising.