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HMRC internal manual

Debt Management and Banking Manual

Interest: Interest Review Unit (IRU): Income Tax Self Assessment (ITSA): Self Assessment background and return processing

ITSA affects individuals, partnerships and trustees who receive tax returns, together with companies that are not resident in the UK and are not trading in the UK through a permanent establishment. It also affects individuals who do not receive a tax return, but need to claim a tax relief or allowance and companies making claims outside their company tax returns. ITSA has applied since the tax year 1996-1997 (although for some partnerships the rules did not apply in full until 1997-1998).

Return handling

It is the customer’s duty to make sure that all returns are correct and sent on time. However, where the handling office;

  • accepts an unsatisfactory return; or
  • makes a mistake in dealing with, repairing or adjusting a return,

that result in an underpayment that the customer may be unaware of, consider the case as follows.

In a HMRC calculation case

Recalculate the interest on the underpaid tax from 30 days after the tax was corrected and the customer told of the extra amount due. This will probably be after a revised statement or letter is sent to the customer. The excess interest is to be given up.

In a self calculation case

The customer is fully aware of how much to pay, and should always take steps to make sure that the correct payment is made by the legal due dates, regardless of any actions by HMRC. Because of this, consideration will not be given to reducing or cancelling interest charged on the balancing payment or the first Payment on Account (POA).

The due date for tax arising from a valid repair to a tax return in a self-calculation case, is the later of either the original due date or 30 days from the date the customer was first told about the extra tax due.

Second POA

Where the correction of the tax due is advised after the due date for the second POA, allow relief on interest until 30 days after the date on which the correct tax due was first advised to the customer, whether or not the case is HMRC or self calculation