DMBM405090 - Interest: Interest Review Unit (IRU): General principles: Accounting for payments

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The customer may object to interest on the grounds that a return (or correspondence) and cheque, or a cheque on its own, were sent on time but we never received them or received them late.

Where the original is banked late

• interest is to be maintained as we cannot be held liable for post being delayed or being lost.

Where a replacement cheque is banked at a later date

• interest is to be maintained unless one of the circumstances below apply.

Normally interest is to be maintained as there is no proof that an original cheque was received with the return or correspondence. Any proof of preparation is not proof of receipt.

Where there is evidence to suggest a cheque was received with the return but we then lost it, for example staple holes or a HMRC notation on the return saying a cheque was also received, then give the benefit of the doubt and give up some interest. Calculate the interest from the interest charging date to the date the customer first contacted us about the missing payment and give this sum up. If replacement payment is made within 14 days of the customer first contacted us then consider giving the interest up in full. However if the replacement payment is delayed then maintain the balance of the interest. To qualify for relief the customer needs to have contacted us before we have issued any reminder or statement of duty that prompts the contact.

Sending the payment to us is not the end of the customer’s responsibility for payment. They should also be monitoring that the payment clears from their bank account and investigating the position if this does not happen within a few days of sending the payment to us. To correct the loss of the original payment the customer may send an unsolicited replacement cheque or contact us about the missing payment. Where the customer has done everything correctly and within a short time of the original going missing, consider giving an interest concession to recognise their pro-active approach.

• If the unsolicited replacement is received within 30 days of the alleged original payment date give up the interest in full.
• Where the customer does quickly get in touch, we confirm we do not appear to have received the cheque and they replace within 14 days of this contact and the whole time period is under 45 days, consider giving up interest from the interest charging date to the date of receipt of the replacement.

To qualify for relief, the customer needs to have contacted us before we have issued any reminder or statement of duty that prompts the contact.

Revenue error in processing amount of cheque or Giro payment

Where a payment is processed for a wrong/lesser amount and the lesser amount is deducted from the customer’s account, the case is usually passed to a specialist unit in Banking Operations who will correct the error. The remainder of the intended payment will be credited to the record with the original EDP.

However, the customer may pay the balance before the error is corrected. In these circumstances give up interest where the extra tax due is paid promptly after the first statement or letter is sent to the customer informing them of the error.

Accounting error cases

An accounting error occurs when a payment from one customer (A) is processed incorrectly and allocated against another customer’s record (B), and then repaid. These cases are dealt with by a specialist team within Banking Operations. BOps Cumbernauld Repayment Team are asked to provide a credit for customer (A) which will have an EDP equal to the original payment so any interest charge for customer (A) should be correct. The specialist team ask customer (B) to return the amount paid to them in error.

If this procedure is followed and customer (A) pays the tax due a second time, the interest should be recalculated as though the original payment was handled correctly and give up the excess.

Payments not allocated in line with the taxpayer’s original instructions

Where no specific instructions are given at the actual time of payment, the payment must be allocated to a customer’s best advantage. Retrospective instruction for allocation will not be accepted.

Where it is proved that a payment has not been allocated in line with the customer’s original instructions, the relevant responsible office should deal with the reallocations. This will automatically correct the interest position.

Where it is not practical or not possible to locally reallocate the money, the IRU will recalculate any interest and repayment interest as if the payments had been allocated correctly in the first place, Give up the net difference between interest to be given up and repayment interest to be recovered.

Where the payments have been correctly allocated from the start, the request should not be accepted. This is because the request is being made in hindsight only to give the customer an interest advantage.

Payment allocated to one taxpayer’s record when meant for more than one then repaid in error 

These cases are sometimes treated as accounting error cases. Especially if the payment was to be split between a number of individual business partners and , because there has not been any communication between the individual partners, the error was not noticed immediately.

• where the error is due to the customer or agent using the wrong payslip uphold the interest.
• where the correct payslip or information was given with the payment, theoretically use the EDP of the original payment and give up the interest.