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HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
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Interest: Interest Review Unit (IRU): Income Tax Self Assessment (ITSA): Payment On Account (POA) not set up because of HMRC error

There are a number of reasons why POAs might not be set up. One of the most common causes is when the ‘ceased’ signal is set in error. However, regardless of the underlying cause, the full impact that a mistake by HMRC had on the customer’s ability to pay on time, must be considered. The actions required to sort out the situation depends on whether the customer opted for a ‘HMRC calculation’ or to self calculate the tax.

For HMRC calculation cases

Recalculate the interest on the underpaid tax from 30 days after the correct POAs were set up. This will probably be after a statement or letter was sent to the customer. The excess interest should be given up.

In self calculation cases

HMRC’s view is that the customer should be aware of how much to pay and arrange for payment by the due dates. Because of this, giving up the interest due on the first POA is not considered.

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.