Contract Settlements: Interest: Calculation for Pre-SA Years
The guidance about contract settlements at EM6000+ only relates to direct tax. You must never include VAT or VAT penalties in a contract settlement.
The interest regime to be applied to pre-SA years depends on whether or not the assessment was made prior to 6 April 1998.
For assessments up to 1995/96 made on or after 6 April 1998 interest is chargeable from 31 January following the end of the tax year - FA 95/S110(2). Thus a 1992/93 assessment made in 2001 would carry interest from 31 January 1994. EM4015
Where there are assessments made before 6 April 1998 for 1995/96 or an earlier year, or an assessment on an ‘old’ partnership for 1996/97 made at any time, then either TMA70/S86 (pre SA) or TMA70/S88 will apply. For detailed guidance refer to EM4015.